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THE 

ARTHUR  YOUNG 

ACCOUNTING 

COLLECTION 


Graduate  School  of 
Business  Administration 

Library  of  the 

University  of  CaUfomia 

Los  Angeles 


Cova^    'XI  '    v^ 


SOUTHERN  BRANCH, 

UNIVERSITY  OF  CALIFORNIA, 

LIBRARY, 

UOS  ANGELES,  CAU^, 


^^raduate  Sohool  of  Businega  Administration 

University  of  California 

Los  Angeles  24,  California 


GARCKE    AND    FELLS: 

FACTORY    ACCOUNTS 

IN     PRINCIPLE     AND     PRACTICE 

A  Handbook  for  Accountants  and  Manufacturers 


APPENDICES    ON    THE    NOMENCLATURE    OF     MACHINE    DETAILS    AND    THE 

RATING    OF    factories;    AND    TABLE    FOR    THE    AMORTIZATION 

OF    LEASES 

INCLUDING    ALSO 

A    GLOSSARY  OF  7'ERMS  AND  A    LARGE  NUMBER   OF 
SPECIMEN   RULINGS 

Seventb  BMtion 
IReviBco  anJ>  biougbt  up  to  5atc 

WITLI  FOREWORD 


J.    M.   FELLS,   C.B.E. 

FELLOW   OF   THE   SOCIETY   OF    INCORPORATED    ACCOUNTANTS   AND   AUDITORS; 

FELLOW   OF    THE    INSTITUTE    OF    COST    AND    WORKS    ACCOUNTANTS  ;    FELLOW 

OF   THE   ROYAL    ECONOMIC   SOCIETY,  ETC. 

FORMERLY   GENERAL   MANAGER    OF   THE   SALT   UNION,    LIMITED 


■    47645 

NEW  YORK 

D.    VAN    NOSTRAND   COMPANY 

EIGHT   WARREN    STREET 

1922 


PRINTED    IN    GREAT    BRITAIN    AT 
THE    DARIEN    PRESS,    EDINBURGH 


rj  Bus.  Admin. 

I  library 

w 


M3Q 


^^ 

PREFACE  TO  THE  SEVENTH  EDITION. 

^;:  As  stated   in  the  Preface  to  the  first  edition,  this  work 

is   the   first   attempt   to   place   before  English    readers   a 

systematised  statement  of  the  principles  relating  to  Factory 

Accounts,  and  of  the  methods  by  which  those  principles 

can  be  put  into  practice,  and  made  to  serve  important 

purposes  in  the  economy  of  manufacture.     Our  aim  has 

N^  been  to  show  not  only  that  as  great  a  degree  of  accuracy 

^  can  be  attained  in  factory  book-keeping  as  in  commercial 

j^  accounts,  but  that  the  books  of  a  manufacturing  business 

^  can  scarcely  be  said   to  be  complete  and  reliable  unless 

^  supplemented  by,  and  to  a  large  extent  based  upon,  the 

"  accounts  special  to  a  factory,  and  we  mentioned  that  in 

;   attempting  to  supply  a  want  which  was  known  to  exist, 

:^  we  but  indicated  the  direction  for  useful  work. 

This  path  has  been  pursued  by  others  as  well  as  our- 
selves, and  their  helpful  criticisms,  commentaries,  and  our 
own  continuous  study  of  the  subject,  have  enabled  us  to 
place  before  our  readers  a  book  which  is  of  practical 
service  under  present-day  conditions. 

The  demand  for  a  further  edition  of  this  work  is  co- 
incident with  marked  industrial  unrest  and  development 
of    dissatisfaction   on   the   part   of    both   employers    and 


iv  PREFACE   TO   THE   SEVENTH    EDITION. 

employed  with  the  existing  relations  between  Capital 
and  Labour. 

We  have  considered  whether,  in  view  of  probable 
economic  changes  in  the  established  methods  of  remunera- 
tion of  labour,  any  substantial  variations  are  needed 
in  the  structure  of  this  work,  as  apart  from  the  revisions 
and  additions  of  a  technical  character  resulting  from 
lengthened  and  wider  experience. 

Its  main  purpose,  however,  is  of  a  technical  character, 
and  while  hitherto  it  has  seemed  appropriate  to  make 
some  references  to  economic  and  social  questions  in 
relation  to  the  remuneration  of  labour  and  allocation  of 
profits,  we  are  of  opinion  that  those  questions  have  now 
become  of  such  importance,  and  they  are  so  interwoven 
with  social  and  political  conditions  and  considerations, 
that  they  do  not  admit  of  being  dealt  with  except  at 
greater  length  than  would  be  practicable,  and  in  a  more 
controversial  spirit  than  would  be  desirable,  in  a  technical 
work.  The  concluding  chapter  of  previous  editions  on 
"  Methods  of  Remunerating  Labour "  has  therefore  been 
omitted  in  the  present  edition,  but  such  portions  of  it 
as  bear  on  the  recording  and  analysis  of  payments 
under  differing  methods  have  been  incorporated  in  other 
chapters. 

We  would,  however,  again  record  our  opinion  that  the 
regrettable  difference  of  view  as  to  these  matters  between 
employers  and  employees  prevents  the  attainment  of  the 
highest  degree  of  efficiency  in  production,  and  is  to  the 
prejudice  of  all  interests.  As  Professor  Fawcett  said 
more  than   a  generation   ago   in   relation   to  this   matter, 


PREFACE   TO   THE   SEVENTH   EDITION.  V 

all  experience  shows  that  there  can  be  no  hope  of  intro- 
ducing more  harmonious  relations  between  them  unless 
both  are  made  to  feel  that  they  have  an  important  and 
direct  interest  in  the  success  of  the  work  in  which  they 
are  jointly  engaged.  Whatever  the  next  stage  in  the 
evolution  of  industrial  organisations  may  be,  there  can 
be  little  doubt  that  the  tendency  must  be  more  and  more 
to  greater  detail  and  accuracy  in  the  preparation  of 
accounts  which  form  the  basis  of  apportionment,  as 
between  partners  or  as  between  rival  and  contending 
interests. 

Our  view  is  that  the  principles  enunciated  in  this  book 
have  a  scientific  basis,  rendering  them  applicable  to  any 
condition  of  industrial  organisation  ;  that  to  demonstrate 
their  economic  results  is  peculiarly  the  province  of  the 
accountant ;  and  to  the  attainment  of  that  end  a  clear 
and  complete  system  of  Factory  Accounts  is  essential. 

In  the  "  Foreword "  to  this  edition  we  have  thought 
it  advisable  to  refer  to  the  connection  of  cost  accounting 
with  industrial  economics,  and  have  indicated  the  direc- 
tions in  which  the  next  advances  toward  scientific  costing 
should  tend,  if  the  economic  facts  of  life  are  to  be  made 
manifest  in  the  most  serviceable,  clear,  and  complete 
manner. 

Mr.  Garcke  desires  to  record  his  obligation  to  his  friend 
and  colleague,  Mr.  Fells,  who  has  undertaken  the  work 
and  responsibility  of  revising  and  extending  the  preceding 
edition  of  this  book,  and  of  writing  the  "  Foreword." 


"  The  counting-house  of  an  accomplished  merchant  is  a  school  of  method 
wherein  the  great  science  may  be  learned  of  ranging  particulars  under 
generals,  of  bringing  the  different  parts  of  a  transaction  together,  and  of 
showing  at  one  view  a  long  series  of  dealing  and  exchange." 

Dr.  Johnson,  in  Preface  to  Roll's  '■'■Dictionary  of  Cofiunerce." 


CONTENTS. 


FOREWORD. 

Scientific  Methods  in  Business  Administration  and  Manage- 
ment. —  Dr.  Alfred  Marshall.  —  Cost  Accounts.  — 
Development  of  Science  of  Accounting. — Systems  of 
"Costing." — Army  Cost  Accounting. — Terminology — 
Economics  and  Accountancy. — Cost  of  Production. — 
Cost  and  Expenditure. — Railway  and  Canal  Commis- 
sion Court. — Cost  and  Terms  of  Art. — Ascertainment 
of  Cost. — Elements  of  Cost. — Units  in  Economics. — 
Units  for  Administrative  Industrial  Purposes. — Differ- 
ences in  Relative  Cost. — Analyses  on  Qualitative  and 
Quantitative  Bases. — Coefficients  in  Cost  Statements. 
— Co-operation  of  Industrial  Technicians  and  Account- 
ants.— Cost  Accounting  and  Scientific  Accuracy  . 


CHAPTER    I. 

INTRODUCTORY. 

The  Development  of  the  Modern  Factory  System. — 
Family,  Guild,  and  Domestic  Systems. — The  Advantage 
of  Combination  and  Specialisation  of  Labour. — Legis- 
lation.— The  History  of  the  Factory  System. — Extension 
of  Routine  and  Registration. — The  Need  for  Factory 


viii  CONTENTS 

PAGES 

Books  of  Account. — Fundamental  Principles  of  Book- 
keeping Applicable,  but  Special  Methods  Required. — 
Requirements    of  a    Manufacturing    Business.  —  The 
Need  of  Analysis  of  Expenditure— of  Ascertaining  Profit 
or  Loss  on  Individual  Transactions — on  Branches  of 
Business. — Ultimate  Determining  Factors  in  Price. — 
Federal  Trade  Commission. — Merchants  and   Manu- 
facturers,—  Changes   in   Trade   Organisation. — Stock 
Ascertainable  without   Survey. — Its  Comparison  with 
Cash. — Advantages  of  Systematic  Factory  Accounting. 
— Advantages  of  Detailed  Records  of  Cost. — Cost  in 
Relation  to  Indirect  Charges  and  Depreciation. — The 
Utility  of  Systematised  Factory  Books — and  Accurate 
Accounts — their  Moral  Effect  on  Employees. — Inade- 
quacy of  Ordinary  Commercial  Books. — Assimilation 
of  Factory  Books  with  them. — Consistency  of  Special- 
isation with  Concentration  in  Accounts. — Merging  of 
Departmental  Books  in  General  Ledger. — The  Utility 
of  Adequate    Office   Organisation  —  its    Economy. — 
Mechanical   Aids. — The   Specialisation  of  Labour. — 
Costings  and  Estimates. — The  Scope  of  this  Work — 
its  Relation  to  Treatises  on  General  Book-keeping. — 
Application  to  Loose  Leaf,  Card,  Slip,  or  other  Systems. 
— Specimen  Rulings. — Exterior  of  Books. — Principles 
Applicable  to   Liquid,  Mixing,  and   other   Trades. — 
Diagrams   showing   Assimilation   of  Accounts. — The 
Differentiation  of  Records. — The  Requisites  of  a  Wages 
System. — The  Purchase  and  Consumption  of  Material. 
— The   Production   of   Commodities.  —  Definition   of 
Prime    Cost.  —  Direct    Cost    Lessened    by   Use    of 
Machinery. — Cost  Books. — Charges  for  Machinery. — 
Progress  in  Cost  Accounting  Since   First  Edition. — 
The  Sale  of  Commodities. — Distinction  between  Stores 
and  Stock. — Depreciation. — Surveys  and  Stocktaking. 
— Subsidiary   Books. — A   Symbolic   Nomenclature. — 
The  Rating  of  Machinery  .         .         .  .         .         •  ^3-31 


CONTENTS.  IX 

CHAPTER   II. 
LABOUR. 

PAGES 

Initial  Step  in  the  Organisation  of  a  Factory.  —  Time 
Recorders. — The  Utihty  of  a  Proper  Wages  System — 
it  Minimises  Error— Prevents  Fraud. — "Dummy  Men." 
— Piecework. — Sick  andother  Funds. — Factory  Acts. — 
Receipts  from  Employees. — Systematic  Allocation  of 
Wages.—  Registration  of  Time. — Time  Office. — Auto- 
matic Time  Recorders. — Automatic  Time  Clocks. — 
Workmen's  Checks.  —  Time  Recorder  Described.  — 
Mess  Room. — Time  Book. — Functions  of  Timekeeper 
and  Gatekeeper. — Building  and  Contracting  Industries. 
—Absentee  Book. — OvertimeBook. — Analysis  of  Time. 
— Time  Boards  or  Records. — Automatic  Time  Registers 
for  Job  Cards. — Time  Allocation  Book. — Verification 
of  Time. — Year  of  Thirteen  Months.— Out-Works'  Time 
Records. — Check  on  Excessive  Overtime  Work. — 
Returns  and  Analysis  of  Overtime. — SoUdarity  of 
Labour. — Premiums  for  Punctuality. — Fines  for  Un- 
punctuality. — Voluntary  Fines. — Application  of  Fines. 
— Piecework. — Standard  Piece  Rates — their  Modifica- 
tions.— Forms  to  be  Used. — Settlement  of  Balances. — 
PubUcation  of  Piecework  Rates.— Non-Continuous 
Working. — Log  Book. — An  Analysis  Book— its  Advan- 
tages.— Advice  of  Men  Engaged,  Dismissed,  or  Fined. 
— A  Wages  Rate  Book. — Records  of  Service  of  Em- 
ployees.— Supplemental  Wages  Advice. — The  Wages 
Book— its  Compilation  and  Analysis. — Stoppages  and 
Deductions. — Income  Tax  Returns. — The  Truck  Acts. 
— Stoppage  Agreement  Form. — "Subbing." — Wages 
Books  for  Disabled  Men.— Summary  of  Wages.— Com- 
pensation Acts. — Receipt  for  Wages. — Amounts  not 
Claimed.  —  Payments    to     Deputies.  —  Out-Workers' 


X  CONTENTS. 

PAGES 

Travelling  and  other  Expenses. — The  Method  of 
Payment. — The  Allocation  of  Wages. — Agreement  with 
Wages  Book. — Wages  Journal. — Allocations  of  Fines 
and  other  Deductions. — Adhesion  to  Factory  Rules. — 
Character  Book.  —  Address  Book.  —  Registers  and 
Certificates  under  Factory  Acts. — Appropriation  of 
Fines. — Rent  as  Wages. — Rent  Roll. — Rent  Receivable 
Book 32-73 

Diagram  I, — The  Assimilation  of  Wages  and  Commercial 

Books. 


CHAPTER  III. 

STORES. 

The  Purchase  of  Material  for  Plant  Maintenance — Manu- 
facturing, or  Retailing. — Initiatory  Stage. — Stores  Re- 
quisition Book. — The  Advantage  of  Orders  for  Stores 
Emanating  from  one  Centre. — Stores  Requisition  Form. 
— The  Sanction  to  Purchase. — Contract  Registers. — 
Small  Purchases. — Orders  to  Vendors — their  Condi- 
tions.— Sale  of  Goods  Act. — Manifolding  Orders. — 
Registration  of  Invoices — their  Examination. — Invoice 
Register. — Stores  Received  Book. — Stores  Ledgers — 
Accounts  in. — Endorsement  of  Invoices — their  Alloca- 
tion.— Stores  at  Out-Stations. — Agreement  of  Com- 
mercial and  Factory  Books  as  to  Material  Purchased 
and  Periodical  Survey. — The  Consumption  of  Material. 
— Initiatory  Stage. — Instruction  to  Manufacture. — 
Planning  and  Progress  Departments. — Production  Re- 
turns.— Manufacture  of  Parts. — Estimates  to  Precede 
Expenditure. — Limitation  of  Issue  of  Material. — In- 
struction to  Foreman. — Stores  and  Sub-Stores. — Stores 


CONTENTS.  XI 

PAGES 

Warrants. — Stores  Issued  Book. — The  Registration  and 
Analysis  of  Stores  Warrants.  —  Stock  Numbers.  — 
Working  Numbers.  —  Cost  Ledger.  —  Summarised 
Issues.  —  Stores  Journal.  —  Material  Returned  to 
Vendors. — Stores  Rejected  Book. — Credit  Notes — their 
Registration. — Surplus  Material. — Advantage  of  Re- 
turning it  to  Store. — Stores  Rejected  Note — and  Book. 
— Shop  Sweepings.  —  Old  Material.  —  Complaint, 
Mistakes,  Waste  Account.  —  Stores  Debit  Note. — 
Temporary  Notes. — Shop  Returns  Book. — Transfers 
between  Store  and  Warehouse. — Cost  of  Processes  and 
Qualities. — Bye-Products     ......  74-99 

Diagram  II. — Assimilation  of  Stores  and  Commercial 

Books. 


CHAPTER  IV. 

PRIME  COST  AND  THE  COST  LEDGER. 

The  Distinction  between  Stock  and  Stores — Utility  of  the 
Distinction. — Process  Transfers. — Uniformity  in  Regis- 
tration of  Cost. — Authority  to  Manufacture. — Cost  of 
Parts  and  Processes. — The  Advantage  of  Correct  and 
Complete  Analysis  of  Cost. — "The  Economy  of 
Machinery  and  Manufactures." — The  Manufacture  of 
Matches — their  Cost. — The  Utility  of  a  Symbolic 
Nomenclature.  —  Standard  Parts.  —  Channels  of  Ex- 
penditure. —  Fixed  Capital.  —  The  Localisation  of 
Maintenance  Expenses — Standing  Orders — the  Wages 
of  Supervision  —  of  Distribution  —  of  Registration. — 
Jobbing  or  Repairing  Work. — Operation  Costs. — 
Factory   General    Charges — their    Registration. — Cost 


Xll  CONTENTS. 

PAGES 

Ledger — how  Compiled — its  Agreement  with  the 
Commercial  Books.  —  Stock  Debit  Note.  —  Stock 
Received  Book. — Stock  Ledger. — Goods  in  Course 
of  Manufacture.  —  Work  in  Progress.  —  Actual  and 
Estimated  Costs  ......       1 00-113 


CHAPTER   V. 

INDIRECT   OR   INCIDENTAL  EXPENSES   AND 
THEIR   ALLOCATION. 

The  Methods  of  Apportioning  Shop  Expenses. — Changes 
since  1887. — The  Utility  of  the  Cost  Ledger  extended 
to  Machinery  Use  and  Plant,  and  other  Accounts. — 
Balances  on  Stock  Orders. — Cost  in  Relation  to  Stand- 
ing Charges. — Depreciation  and  Profit. — Systems  of 
Prime  Cost. — ^Method  of  Charging  Indirect  Expenses 
in  Proportion  to  Wages  Paid — and  to  Wages  and 
Materials.— Oncost. — Skilled  and  Unskilled  Labour. — 
Need  of  Allocating  Machinery  Costs. — A  Machine 
Flour  Rate. — How  Machinery  Charges  are  Arrived  at. — 
Depreciation  in  Relation  to  Cost. — Oncost. — Drawing 
Office  Establishment  Expenses. — Cost  Ledger. — Ex- 
panding Business  may  Increase  Cost. — Interest  and 
Profit  in  Relation  to  Cost. — Comparisons  between 
Actual  and  Estimated  Costs.  —  Comparative  Cost 
Register. — Graphs  and  Curves. — Departmental  Cost 
Ledgers. — Departmental  Transfers. — Cost,  plus  Per- 
centage Contracts. — Actual  and  Apparent  Costs. — 
Self-Balancing  Principle       .....       114-125 

DlAGR.\MS    III.    AND    IV. — ThE   ASSIMILATION    OF    CoST   AND 

Commercial  Books. 


CONTENTS.  xiii 

CHAPTER   VI. 

FIXED   CAPITAL   AND    DEPRECIATION. 

PAGES 

Mill's  Definition  of  Fixed  Capital. — Deterioration. — Depre- 
ciation of  Buildings  and  Plant — Varying  Views. — 
Marshall's  "Principles  of  Economics." — Depreciation 
in  Relation  to  Maintenance. — Factors  in  Determination 
of  Depreciation  Rate.— Obsolescence. — Supersession. 
— Methods  of  Dealing  with  Depreciation. — Adherence 
to  Depreciation  Rate  for  Period  of  Time.  — Double 
Account  System. — The  Rough-and-Ready  Method. — 
Comparative  Depreciation  Tables. — Average  Annual 
Charge. — Repairs  and  Renewals  Fund. — Depreciation 
in  Relation  to  Capital — to  Current  Expenditure — to 
Railway  and  Water  Companies — to  Reserve  Funds — 
to  Obsolescence — to  the  Life  of  the  Object — to  the 
Cost  of  Maintenance. — Varying  Methods  in  Vogue. 
— The  Ascertainment  and  Allocation  of  Cost  of 
Deterioration — Direct  Method. — Method  of  Periodical 
Valuation  —  its  Advantages — its  Disadvantages — its 
Results  when  Fallacious — its  Bearing  on  Capital  and 
Revenue  Accounts. — Skilled  and  Unskilled  Labour. — 
Loss  on  Capital  and  Loss  on  Revenue  Accounts. — 
Mr.  Justice  Buckley  and  the  Case  of  the  Neuchatel 
Asphalte  Co. — The  Natal  Land  and  Colonisation  Co. 
—  General  Commercial  and  Investment  Trust.  — 
McNamara  &  Co.,  Ltd. — Barrow  Hfematite  Steel  Co., 
Ltd.  —  The  Cory  Case.  —  British  Bank  of  South 
America  and  Trinidad  Lake  Asphalte  Co.'s  Cases. 
— Deductions  from  these  Decisions. — Rating  Cases. — 
Cambridge  Gas  Co. —  English  and  United  States 
Practice — a  Practical  View  of  the  Matter. — Increase 
in  Value  of  Fixed  Assets. — The  Revenue  Account 
in   Relation    to   Market  Value  of  Fixed  Assets  in  a 


Xiv  CONTENTS. 


Going  Concern. — The  Establishment  of  Sinking  and 
Reserve  Funds. — Losses  on  Capital  Account. — The 
Need  of  Insurance. — The  Income  Tax  Acts  in  Relation 
to  Fixed  Capital. — Depreciation  Charge  on  Business  126-145 


CHAPTER   VII. 

MACHINERY   USE. 

Verification  and  Extension  of  Principles  Outlined  in  1887. — 
The  Greater  Use  of  Machinery. — Increasing  Need  of 
Ascertaining  its  Cost  of  Use. — The  Life  of  an  Object 
the  best  Basis  for  Depreciation  Rate — the  Difficulties 
of  this  Method  —  the  Advantages.  —  Leases  —  an 
Amortisation  Table — a  Hypothetical  Ledger  Account. 
— The  Annuity  System — Sinking  Fund  and  "  Straight 
Line  "  Methods — Insurance. — Dilapidations. — Classi- 
fication of  Assets.  —Fixed  and  Loose  Plant — Tool  Kits 
— Loose  Tools  Register — Patterns — Tools — the  Appro- 
priation of  their  Cost. — The  Numbering  of  Distinctive 
Objects. — The  Expenditure  on  Plant — its  Registration. 
— Machinery — Bases  of  Charges. — Plant  Ledger. — 
Plant  Debit  Note. — The  Ratio  between  the  Life  and 
Cost  of  a  Machine. — Moving  Parts. — Plant  Journal. — 
The  Appropriation  of  Residual  Values. — Grouping 
Machinery. — Plant  Debit  Summary. — Unit  of  Product 
and  other  Methods. — Relative  Advantage  in  Use  of 
Different  Kinds  of  Machinery. — Idle  Capacity. — Idle 
Hour  Rate  —  Productive  Hour  Rate.  —  Normal 
Machine  Rate. — The  Cost  of  Fuel— its  Apportion- 
ment.— The  Apportionment  of  Standing  Charges  in 
Relation  to  Profit  and  Loss — to  Cost  of  Production. — 
The  Valuation  of  Patents  and  Goodwill. — Wasting 
Assets 146-164 


CONTENTS.  XV 


CHAPTER   VIII. 
STOCK. 

PAGES 

Realisation  or  Distribution  of  Manufactured  Commodities 
— Involves  Four  Classes  of  Transactions  being  brought 
into  Account  by  Corresponding  but  Independent  Pro- 
cesses of  Book-keeping. — The  Agreement  of  the 
Commercial  and  Factory  Books. — Transfer  from  Fac- 
tory to  Warehouse. — Stock  Debit  Note. — The  Stock 
Received  Book. — Transfer  from  Warehouse  to  Factory 
— the  Rejected  Stock. — Transfer  Notes — Transfer 
Books— their  Agreement. — Transfer  Analysis  Book. — 
The  Sale  of  Commodities. — Orders  from  Customers, 
how  Dealt  with. — Orders  Received  Book.— Advice  to 
Warehouseman. — Forwarding  Note. — Stock  Requisi- 
tion.— Stock  Issued  Book. — Warehouseman's  Daily 
Return  of  Stock  Issued. — Sales  Analysis  Book. — Stock 
Returned  by  Customers — its  Registration — and  Analy- 
sis.— Stock  Returned  Debit  Note. — Stock  Returned 
by  Customers  Book. — The  Concentration  of  Books. — 
The  Pricing  of  Loaned  Articles — its  Relation  to  the 
Profit  and  Loss  Account.— The  Agreement  of  the 
Commercial  and  Factory  Books  exemplified. — Whole- 
sale and  Retail  Transactions — their  Distinction — their 
Combination — their  Registration. — The  Manufacture 
of  Complete  or  Subsidiary  Parts — the  Localisation  of 
their  Cost  ........       165-182 

Diagram  V. — The  Assimilation  of  Stock  and  Commercial 

Books. 


XVI  CONTENTS. 


CHAPTER    IX. 

SURVEYS. 

PAGES 

The  Utility  of  Stores  and  Stock  Ledgers  in  relation  to 
Stocktaking  and  the  General  Accounts.  —  The 
Balance-Sheet  independent  of  a  Stocktaking. — Fac- 
tory Accounts  in  relation  to  Book-keeping  by  Single 
Entry. — Surveys  in  relation  to  Commercial  Ledgers. 
— The  Utility  of  Verifying  the  Details  of  Inventories — 
the  Comparative  Advantages  of  Partial  and  General 
Surveys. — The  Need  of  a  Standard  of  Efficiency  in 
Stocktakings. — Summarising  Survey  Results. — The 
Agreement  of  the  Inventories  with  the  Factory  and 
Commercial  Ledgers. — Inherent  Conditions  of  Stock. 
— Allowance  for  Margin  of  Error  or  Waste. — Surveys 
in  relation  to  Stores,  Stock,  and  Plant. — Agency  or 
Consignment  Goods. — Mechanical  Divisions  and  Aids 
in  Surveys. — Location  of  Stores. — The  Essentials  of 
a  Stores  and  Stock  System — Stores  or  Stock  Register. 
— The  Efficiency  of  Control  over  Commodities. — 
Weighing  Vehicles.  —  Gate  Passes.  —  Departmental 
Transfers. — Excessive  Supplies  in  Stores  or  Stock. — 
The  Valuation  of  Commodities  in  Relation  to  Cost  of 
Production  and  Market  Prices.  —  Survey  Prices  in 
relation  to  Establishment  Expenses  and  Standing 
Charges. — The  Realisation  of  Profit.  —  Loading  Per- 
centage for  Stores  Expenses. — The  Valuation  of  Raw 
Material  and  Exceptional  Commodities. — Base  Metals. 
— Departmental  or  Branch  Prices. — Abnormal  Times. — 
Interest  and  Cost. — Valuation  in  Relation  to  Obsoles- 
cence.— Valuation  of  Old  Material. — Reduction  in  the 
Valuation  of  Stocks    ......       183-201 


CONTENTS.  xvii 

CHAPTER   X. 

SUBSIDIARY    BOOKS. 

PAGES 

Summary  of  Chapter. — The  Registration  of  Plant  or  Machi- 
nery acquired  on  the  Purchase  Hire  System. — Purchase 
Hire  and  Income  Tax. — The  Accounts  of  Government, 
Railway,    and    similar    Factories    and    Workshops. — 
Registration  of  Costs  by  Means  of  Cards  and  Symbols 
— its   Disadvantages. — Advantages    Claimed  for  Card 
System. — Cartage  Accounts. — Horses  and  Vehicles. — 
Motor  Vehicles. —  Units  of  Cost. — Freight    Books. — 
The   Railways   Bill,   1921.^ — -The    Railway  and  Canal 
Traffic  Act,   1888. — Rates  and  Charges  Confirmation 
Acts,  1891-92 — and  other  Railway  Acts. — The  Trans- 
port   Act,    1918. — Consignment    Note.— Accuracy   in 
Declaration. —  Railway  Sidings.— Railway   Rebates   or 
Allowances. — Wagon  and  Van  Books. — Demurrage. — 
Lighter  and  Barge  Books. — Craft   Register. — Towage 
Book. — Stock  Diagrams. — Packing  Cases. — Method  of 
Registering  Cost  of  Empties. — Coal  Accounts. — Weigh- 
ing Machine  Book. — Machinery  Examination  Register. 
— Surprise  Visits  Book. — Gas,  Water,  and  Electricity 
Meter    Books. — Brigade    and    Fire    Hose    Books. — 
Casualty    Book. — Patterns    Accounts. — Log    Book. — 
Weather    Charts. — Visitors'     Book. — Stores    Delivery 
Diary.  —  Staff   Register.  —  Stationery.  —  Catalogues 
Issued— and  Advertisement  Registers. — Notices  Book. 
— Licences. — Boiler  Inspection. — Accounts  relating  to 
Sick,  Provident,  Superannuation,  and  similar  Funds. 
— Books  and  Forms  required  under  Factory  Acts. — 
Scope  and  Conditions  of  Factory  and  Workshop  Acts. 
— Public   Health   Acts.— Trades    Board   Acts. — Local 
Bye-Laws. — Electricity  Regulations     .         .         .       202-223 
b 


XVIU 


CONTENTS. 


APPENDICES. 

PAGES 

A. — Nomenclature  of  Machine  Details  (Paper  by  Mr. 

Oberlin  Smith) 225-232 

B. — The  Rating  of  Factories  Containing  Machinery  233-243 

C. — Table  for  Determining  Amortization  of  Leases, 

Etc 244-250 


GLOSSARY  OF  TERMS 
INDEX    .         .         .         . 


253-261 
263-290 


TABLE    OF   SPECIMEN    RULINGS. 


Time  Book,  No.  i 
„  No.  2 

No.  3 
Overtime  Book 
Time  Record  Sheet 
Time  Allocation  Book    . 
Out- Works  Time  Record  Sheet 
Overtime  Return 
Overtime  Comparison  Book    . 
Piecework  Return 


Specimen  No. 

PAGE 

I 

36 

2 

40 

3 

40 

4 

40 

5 

41 

6 

44 

7 

45 

8 

46 

9 

46 

10 

48 

CONTENTS. 


XIX 


Piecework  Analysis  Book 

Wages  Advice 

Wages  Rate  Book  . 

Wages  Book 

Summary  of  Wages 

Unclaimed  Wages  Book 

Pay  \\^ages  Note     . 

Wages  Remittance  Form 

Cash  Sheet     . 

Money  Tray  . 

Abstract  of  Wages  . 

Stores  Requisition 

Stores  Requisition  Book 

Invoice  Register  Book 

Stores  Received  Book 

Stores  Ledger 

Invoice  Endorsement 

Instruction  to  Foreman  of  Works 

Stores  Warrant 

Stores  Issued  Book 

Stores  Rejected  Book 

Stores  Debit  Note  . 

Shop  Returns  Book 

Cost  Ledger  . 

Stock  Debit  Note  . 

Stock  Received  Book 

Stock  Ledger 

Amortisation  Table 

Plant  Ledger 

Plant  Debit  Note  . 

Plant  Debit  Summary 

Transfer  Note         .    • 

Transfer  Book 

Orders  Received  Book 

Stock  Requisition  and  Advice  to  Warehouse: 


Specimen  No. 

PAGE 

II 

52 

12 

56 

13 

59 

14 

60 

15 

60 

16 

^5 

17 

66 

18 

66 

19 

67 

20 

68 

21 

69 

22 

76 

23 

76 

24 

Si 

25 

Si 

26 

83 

27 

84 

28 

87 

29 

8S 

30 

89 

31 

92 

32 

93 

33 

94 

34 

109 

35 

no 

36 

hi 

37 

1 12 

38 

149 

39 

154 

40 

156 

41 

157 

42 

170 

43 

170 

44 

172 

n  45 

172 

XX 


CONTENTS. 


Stock  Issued  Book 

Stock  Requisition 

Stock  Returned  Debit  Note    . 

Stock  Returned  by  Customers  Book 

Stock  Survey  Sheet 

Cartage  Advice       .... 

Railway  Rate  Book 

Wagon  and  Van  Statement  Form    . 

Wagon  Journey  Repairs  Book 

Time  Sheet  for  Lighter,  Barge,  or  Boat 

Craft  Register         .... 

Fuel  Summary  Form 


Specimen  No. 

PAGE 

46 

174 

47 

176 

48 

176 

49 

177 

50 

18S 

51 

209 

52 

212 

53 

212 

54 

215 

55 

215 

56 

216 

57 

219 

FACTORY    ACCOUNTS 

THEIR  PRINCIPLES  AND  PRACTICE. 


FOREWORD. 

Dr.  Alfred  Marshall  in  "Industry  and  Trade" — a 
study  of  industrial  technique  and  business  organisation, 
and  of  their  influence  on  the  conditions  of  various  classes 
and  nations — says  that  movements  towards  the  general 
application  of  scientific  methods  in  business  management 
and  administration  were  pioneered  by  studies  of  Cost 
Accounts,  and  in  this  connection  makes  a  generous  refer- 
ence to  the  first  appearance  of  Factory  Accounts  in  1887. 

He  mentions  that  the  use  of  scientific  analysis  as  an 
engine  of  business  first  attracted  attention  as  the  result  of 
dissatisfaction  with  the  customary  methods  of  making  up 
"  Cost  Accounts,"  that  is,  accounts  which  claim  to  show 
the  total  charges  to  be  attributed  to  each  particular  class 
of  product,  as  contrasted  with  cost  accounting,  by  which 
the  path  of  each  element  of  material  or  labour  is  traced  so 
as  to  show  how  much  is  embodied  in  the  product,  how 
much  consumed  in  the  process,  and  how  much  is  lost. 

He  points  out  that  the  science  of  accounting  has 
received  a  very  high  development  during  the  last  few 
generations,  but  that  Accountants  "  even  now  often  merely 
apply  a  few  broad  rules  which  represent  broad  results  fairly 

B 


2  FOREWORD. 

well,  while  making  no  pretence  of  being  adapted  closely 
to  the  special  circumstances  of  each  individual  case." 

Gradually,  however,  increasing  attention  has  been  paid 
to  the  actual  extent  to  which  each  process  of  production 
is  operated  ;  how  much  use  is  made  during  the  production 
of  each  class  of  plant ;  what  it  costs  ;  what  is  its  wear  and 
tear ;  what  is  its  consumption  of  power ;  and  what  is  its 
liability  to  depreciation. 

Similarly  the  charges  to  be  set  against  any  particular 
product  on  account  of  storage  accommodation,  and 
expenses  of  internal  movement,  are  specially  examined, 
for  it  is  obvious  that  some  goods  ought  to  be  charged 
at  a  low  rate  relatively  to  their  prime  costs,  while  to 
others  a  high  rate  should  be  applied,  and  that  an  hour's 
work  of  a  machine  for  which  there  is  but  little  appropriate 
work  must  be  charged  more  highly  than  that  of  a  machine 
which  is  seldom  idle. 

In  1887,  when  "Factory  Accounts"  first  appeared, 
"  Cost  Accounting "  was  a  neglected  and  non-recognised 
branch  of  Accountancy.  To-day  it  is  no  longer  necessary 
to  urge  the  importance  of  the  systematic  and  continuous 
ascertainment  of  the  costs  of  production,  and  this  advance 
in  appreciation  of  "  Cost  Accounting "  has  arisen,  in  the 
main,  from  the  prominence  given  to  more  or  less  empirical 
systems  of  "Costing"  brought  into  operation  during  the 
war,  not  only  in  connection  with  the  control  by  the  State 
of  a  large  number  of  industrial  organisations  in  order  to 
obtain  requisites  for  the  carrying  on  of  war,  munitions, 
food-stuffs,  and  other  commodities,  but  also  in  connection 
with  Governmental  controls  in  relation  to  the  maximum 
prices  chargeable  in  the  various  branches  of  trade  and  for 
wholesale  and  retail  transactions. 

The  methods  of  "  Costing "  adopted  were  in  many 
respects  suitable  for  the  immediate  purpose,  but  they  were 


FOREWORD.  3 

not  intended  to  make  manifest  from  the  systematic  and 
scientific  examination  of  every  element  of  expenditure  the 
various  lessons  to  be  learnt  in  the  sphere  of  industrial 
economics,  and  they  yielded  only  estimates  of  cost. 

The  same  objections  apply  to  recent  suggestions  that 
in  factories  where  there  is  a  great  deal  of  repetition  work, 
such  expense  as  there  may  be  in  a  Cost  Accounting  system 
might  be  avoided  by  the  adoption  of  methods  of  Costing 
based  on  some  figures  specially  compiled  for  comparison 
with  standard  efficiency  costs  founded  on  estimates. 

In  the  Army  a  system  of  Cost  Accounting  is  now  being 
adopted  which  is  not  merely  a  series  of  Costings,  but 
which  constitutes  a  complete  analysis  of  the  whole  of  the 
expenditure  incurred.  The  Select  Committee  on  National 
Expenditure  has  reported  most  favourably  on  the  method 
adopted,  and  has  recommended  that  this  system  should  be 
applied  to  the  other  spending  departments  of  the  State, 
The  War  Office  was  the  first  department  of  the  Govern- 
ment to  adopt  a  system  of  Cost  Accounting,  but  before 
doing  so  referred  the  matter  to  a  Committee  who  in  their 
report,  on  which  the  Army  Council  decided  to  make  the 
departure,  stated  inter  alia  : — 

"  Among  the  advantages  arising  from  the  use  of  accounts  of 
a  Costing  type  may  be  mentioned  those  arising  from  the  regular 
and  systematic  bringing  before  the  individuals  who  are  ultimately 
responsible  for  expenditure,  the  various  objects  on  which 
expenditure  has  been  incurred,  and  the  channels  through  which 
the  expenditure  has  been  made.  The  details  of  the  account, 
although  expressed  only  in  money  in  the  final  account,  reveal  the 
commodities  used  and  the  services  performed,  which  are  eventually 
summed  up  in  these  terms.  By  the  agency  of  Cost  Accounts  it 
is  thus  possible  to  consider  the  constituent  elements  of  cost,  and 
by  these  means  to  ascertain  the  differences  which  arise  from 
varying  conditions,  and  to  consider  methods  by  which,  without 


4  FOREWORD. 

impairing  efficiency,  either  in  service  or  in  production,  economies 
may  be  effected.  Cost  Accounts  also  reveal  the  differences  which 
arise  from  varying  conditions  as  regards  supply  of  commodities 
or  remuneration  of  labour  in  different  districts. 

"  A  knowledge  of  all  these  varying  factors  is  essential  to  good 
— that  is,  to  efficient  and  economical — administration  or  manage- 
ment. Without  such  data,  administration  and  management  are 
either  more  or  less  haphazard,  or  are  carried  out  on  empirical 
lines.  It  is  only  through  the  study  of  comparative  costs  that 
progress  in  a  commercial  sense  can  be  obtained. 

"  The  systematic  compilation  of  Cost  Accounts  has  the  further 
advantage  of  bringing  about  natural  uniformity  in  the  methods  of 
accounting  with  such  variations  only  as  may  be  necessary,  owing 
to  the  special  circumstances  of  any  locality  or  any  special  class 
of  service  or  of  product. 

"  Through  Costing  being  undertaken  as  a  distinct  function 
in  the  accounting  system,  it  is  possible  to  obtain  records  of 
a  detailed  but  general  character,  obviating  the  need  of  a  large 
number  of  accounts  being  kept  individually  and  for  the  information 
of  some  particular  branch  of  administration  without  consideration 
of  the  relation  of  that  particular  branch  to  the  whole  undertaking. 
Cost  accounting  will  thus  lead  to  the  prevention  of  the  duplicating 
of  account-keeping,  and  to  the  elimination  of  such  accounts  that 
are  kept  as  do  not  of  themselves  serve  any  useful  or  informative 
purpose." 

Most  branches  of  Science  and  Art  possess  a  terminology 
in  which  words  employed  as  "terms  of  art"  have  distinct 
and  definite  meanings,  but  the  progress  of  Accountancy 
has  been  retarded  by  its  chief  terms  and  phrases  having 
multiple  and  ambiguous  meanings. 

In  the  interpretation  of  terms  of  a  technical  or  semi- 
technical  character  used  in  accounting,  reference  to  a 
dictionary  is  of  comparatively  little  use,  for  until  those 
engaged  in  various  pursuits  have  moulded  the  meaning 
of    the    terms    or    phrases    they    use,    the    compilers    of 


FOREWORD.  5 

dictionaries  are  only  able  to  give  vague  and  general 
connotations  to  those  terms. 

The  need  in  Accountancy  for  definition  of  terms  so  as 
to  obtain  a  uniform  and  scientific  phraseology  is  accentuated 
by  the  differing  sense  in  which  words  used  by  accountants 
are  employed  by  economists. 

Amongst  the  subject-matters  common  to  Economics 
and  Accountancy  are  Capital,  with  its  subdivisions  of  con- 
sumption, auxiliary,  circulating,  fixed  and  specialised. 
Income  in  money  and  net.  Interest,  profits,  earnings  of 
management,  value,  prime  cost,  supplementary  and  total 
cost,  or  cost  of  production.  Distribution,  exchange,  wages, 
time  and  task  earnings. 

In  economics,  from  the  lax  use  of  the  term  "  Cost  of 
Production,"  many  misunderstandings  have  arisen  and 
many  barren  controversies  have  taken  place.  It  is  said 
that  Mill  and  other  economists  have  used  the  term  in  two 
senses,  sometimes  to  signify  the  difficulty  of  production 
and  sometimes  the  total  money  outlay  that  has  been 
incurred.  Dr.  Marshall  amplifies  its  general  definition 
in  Economics  by  pointing  out  that  as  regards  a  particular 
business  it  always  means  money  cost,  and  commonly 
includes  a  reasonable  rate  of  profit,  together  with  insurance 
against  risk  ;  whilst  remuneration  of  the  work  of  the  owner 
of  the  business  does  not  appear  as  a  separate  item  in  the 
accounts,  but  goes  with  interest  on  capital  under  the  head 
of  "  Profits." 

If  there  were  co-ordination  of  the  terms  used  in 
Economics  and  Accountancy,  it  should  be  possible  to  state 
the  economic  facts  of  industry  in  a  manner  so  clear  and 
succinct  as  to  prevent  the  barren  and  often  bitter  con- 
troversy between  the  different  interests  in  an  industry  as 
to  what  the  facts  really  are. 

Lack  of  precision  in  Accountancy  terms  has  led  to  the 


6  FOREWORD. 

two  words  "Cost"  and  "Expenditure"  being  often  used 
indiscriminately  and  as  synonyms,  and  in  some  recent  cases 
in  the  Railways  and  Canal  Commission  Court,  little  (if  any) 
distinction  has  been  drawn  between  them.  In  a  case 
before  that  Court  in  191 6,  which  turned  mainly  on  the 
use  of  the  word  "  Cost "  in  an  Act  of  Parliament,  and 
the  distinction  to  be  drawn  between  that  word  and 
"  Expenditure,"  it  was  pointed  out  in  a  minority  judgment 
that  these  words  were  not  convertible  terms.  The  member 
of  the  Court  who  expressed  this  view  stated  that  Ex- 
penditure was  a  debit  factor  which  referred  to  outlay  only, 
and  was  absolute,  whilst  Cost  was  a  resultant  and 
comprehensive  factor,  and  was  relative. 

This  minority  judgment  formed  the  basis  of  an 
application  to  the  Court  of  Appeal  to  review  the  case  and 
reverse  the  judgment  of  the  majority  in  the  Court  below. 
But  the  higher  Court,  however,  did  not  allow  the  application, 
the  then  Master  of  the  Rolls,  referring  to  a  previous  practice 
of  the  Railway  and  Canal  Commission  Court  under  an 
Act  of  1894,  expressly  repudiating  the  view  that  the  "cost 
of  working  "  a  railway  was  a  "  term  of  art." 

It  was  thought  that  the  majority  judgment  still  left  open 
the  question  whether,  in  ascertaining  an  increase  in  cost 
consequent  upon  increased  rates  of  pay  and  shorter  working 
hours,  the  result  of  altered  modes  and  methods  of  working 
should  not  be  taken  into  account. 

This  view  did  not,  however,  commend  itself  to  the 
members  of  the  Railway  and  Canal  Commission  Court, 
one  member  of  the  tribunal  stating  : — 

"  The  proper  method  of  arriving  at  the  increased  cost 
is  to  ascertain  the  cost  of  working  the  railway  in  191 3 
quite  regardless  of  the  way  in  which  it  was  worked  in 
191 1,  then  to  apply  the  191 1  scale  of  wages  to  the  191 3 
working,  and  the  difference  will  give  the  increase  which 


FOREWORD.  7 

the  company  can  claim.  This  involves  no  comparison 
of  either  wages  paid  or  the  miles  run  or  quantum  of  work 
done  in  some  week  in  191 1  with  wages  and  miles  and 
work  done  in  a  week  in  191 3." 

By  its  nature  this  mode  is  a  comparatively  simple  and 
primitive  one,  ignoring  altogether  as  it  does  the  difference 
between  Cost  and  Expenditure,  and  is  thus  open  to  very 
grave  objection  from  a  commercial  and  from  an  accounting 
point  of  view. 

That  "Cost"  is  a  relative  term  is  gradually  winning 
recognition  in  accountancy  circles,  although  it  is  sometimes 
applied  somewhat  loosely  to  an  expenditure  on  construc- 
tional or  other  work  to  which  no  unit  of  cost  can  be 
applied,  as,  for  instance,  to  the  capital  expenditure  on 
communal  undertakings  which  are  not  operated  mainly 
for  revenue  purposes,  but  for  purposes  which  are  intended 
to  promote  the  health  and  happiness  of  the  community. 

In  usage  the  word  "Cost"  is  often  amplified  into  such 
terms  as  "cost  of  working,"  "cost  of  production,"  or  is 
limited  in  meaning  by  the  addition  of  qualifying  words 
in  such  cases  as  "  prime  cost,"  "  full  cost,"  "  actual  cost," 
"  direct  cost,"  "  true  cost,"  "  supplementary  cost  "  ;  but  none 
of  these,  or  the  other  expressions  used  in  Cost  Accounts 
or  in  "  Costings,"  are  recognised  "  terms  of  art,"  and  they 
have  no  strictly  and  generally  accepted  defined  meaning. 

The  word  "  Cost "  is  often  used  as  a  generic  phrase 
covering  the  aggregate  of  many  cost  ascertainments  in 
the  successive  stages  in  manufacture  or  distribution 
through  which  the  commodity  has  passed. 

In  practice,  the  m.ethods  of  Cost  Accounting  must 
depend  very  largely  not  only  on  the  technique  of  the 
particular  trade  and  industry  concerned,  but  also  on  the 
stage  of  production,  distribution,  or  use  at  which  the 
business  interest  of  those,  on  whose  behalf  the  ascertain- 


8  FOREWORD. 

ment  is  sought,  ceases.  The  classification  of  the  con- 
stituent elements  of  Cost  is  also  dependent  upon  the 
determination  of  what  information  it  is  desired  to  obtain, 
and  the  particular  purpose  or  purposes  which  it  is  hoped 
to  subserve  by  the  ascertainment  of  Cost  at  particular 
situations. 

The  ascertainment  of  Cost  at  various  stages  and  under 
varying  conditions  renders  it  desirable  to  refer  in  any 
save  an  elementary  ascertainment  of  Cost  under  primal 
conditions,  to  the  costs  of  production,  instead  of,  as  has 
hitherto  been  the  case,  to  cost  of  production.  This  more 
accurate  phrase  emphasises  the  fact  that  ultimate  cost  may 
be  the  product  of  an  intermediate  series  of  costs. 

Under  present-day  economic  conditions,  to  ensure  the 
continuance  of  production  not  only  now  but  in  the  future, 
regard  has  to  be  paid  to  all  elements  which  enter  into 
or  have  to  be  considered  with  regard  to  the  costs  of  a 
commodity.  Such  costs  range  themselves  under  eight 
generic  factors. 

Generic.  Illustrative. 

1.  Fixed  Capital       -         -     Acquired    good-will,    freeholds,   and 

kindred  objects.  Formation  ex- 
penditure.    Replacement. 

2.  Circulating  -         -         -     Charges  in  connection  with  interest 

on  stock  manufactured  or  in 
process,  stores,  and  working  capital. 

3.  Rights  -         -         -     Royalties     on     patents,      processes, 

charges  in  relation  to  permits, 
leases,  wayleaves,  and  easements. 

4.  Power-         -         -         -     Wages  and  other  payments  in  respect 

of  manual  power  performed  by 
skilled  and  non-skilled  workers, 
and  for  machine  labour  utilised  or 


FOREWORD. 


Generic. 
Power  {continued) 


5.  Materials 


6.  Auxiliary  Services 


State  and  Local  Govern- 
ment Services 


8.  Contingency  Services 


Illustrative. 

directed  by  them.  The  cost  of 
producing  or  purchasing  fuel  and 
other  forms  of  energy  such  as  coal, 
steam,  electricity  heat,  water,  gas, 
and  oil.  Remuneration  paid  to 
mental  workers  in  salaries,  fees, 
and  emoluments  in  connection 
with  research,  directive  and 
administrative  activities." 

Expenditure  in  producing,  or  the  pur- 
chase price  paid  for,  raw  materials, 
or  in  the  manufacture  of  parts. 

Payments  or  provisions  in  connection 
with  insurance,  publicity,  market- 
ing, transportation  and  other  aids 
to  production  and  distribution. 

Taxes,  rates,  tolls,  and  charges  in 
connection  with  police  or  other 
protection.  Maintenance  of  roads, 
sanitation,  or  payments  for  other 
purposes  for  which  State  or  muni- 
cipal authorities  levy  charges. 

Risks  not  usually  covered  by  in- 
surance, including  bad  debts,  dis- 
turbances due  to  war,  panics,  and 
strikes.  Supersession  of  processes 
or  patents  as  the  result  of  com- 
petition or  invention.  Provision 
for  the  expansion,  development, 
and  improvement  of  a  particular 
business  to  ensure  the  maintenance 
of  its  position  relatively  to  other 
undertakings  of  a  like  character,  or 
that  it  may  be  adopted  to  altered 
trade  conditions. 


10  FOREWORD. 

Whilst  in  economic  science  the  unit  in  which  cost  of 
production  is  stated  is  nearly  always  that  of  a  whole 
process,  for  administrative  industrial  purposes  this  unit 
has  to  be  detailed  into  component  parts  which,  in  different 
kinds  of  undertakings,  vary  with  the  purposes  for  which 
the  information  is  required,  whether  the  ascertainment  is 
for  ordinary  commercial  and  competitive  purposes,  or  for 
technical  purposes  with  a  view  to  improving  the  product, 
increasing  the  output,  or  reducing  the  expenditure  on 
production. 

The  need  of  care  in  the  selection  of  the  units  of  cost 
may,  as  a  matter  applicable  in  principle  to  other  industries, 
be  instanced  in  connection  with  the  ascertainment  of  cost 
in  railway  working.  Until  recently  in  the  majority  of 
cases,  and  even  at  present  in  public  inquiries,  the  unit 
adopted  lias  been  the  train  mile  or  the  engine  mile.  The 
former  recorded  the  number  of  miles  travelled  by  a  train, 
whilst  the  engine  mile  not  only  recorded  the  mileage  run 
by  the  engine,  but  often  included  an  allowance  for  a 
number  of  miles  not  actually  run.  In  many  cases  the 
time  during  which  engines  were  "standing"  was  calculated 
in  mileage  as  if  they  had  been  running  on  a  basis  of  5  or 
6  miles  an  hour. 

Administrative  economy  in  the  working  of  a  railway 
naturally  consists  in  running  as  small  a  number  of  miles 
as  is  possible,  consistently  with  doing  the  required  work. 
Economies  effected  by  the  better  loading  of  passenger 
coaches,  wagons,  or  vans,  or  by  the  use  of  more  powerful 
engines,  or  by  running  trains  to  which  an  increased  number 
of  vehicles  were  attached,  were  not  only  not  reflected  in 
costs  ascertained  on  the  basis  of  train  miles  run,  but  the 
result  shown  on  such  basis  would  lead  to  absolutely 
erroneous  conclusions. 

Thus  if  the  train  mile  were  taken  as  the  unit  of  cost. 


FOREWORD.  1 1 

the  anomaly  arises  that  the  more  economically  and 
efficiently  the  railway  was  worked,  the  greater  would  seem 
to  be  the  cost  ;  that  is  to  say,  the  saving  in  the  number  of 
miles  run  shows  an  increase  of  cost  in  the  miles  actually 
run.  The  adoption  of  a  unit  of  cost  based  upon  the 
number  of  tons  carried  one  mile  known  as  the  ton-mile — 
that  is  quantity  multiplied  by  distance  hauled — obviates 
the  anomaly  referred  to,  so  far  as  goods  traffic  is  concerned. 

In  railway  working,  however,  as  in  many  other  industries, 
the  use  of  a  single  unit  of  cost  does  not  enable  the  most 
effective  and  economical  working  to  be  carried  out,  and 
does  not  afford  sufficiency  of  information,  and  many  other 
units  have  to  be  employed. 

Difference  in  the  relative  cost  in  making  or  producing 
the  same  or  similar  products  under  different  conditions 
of  time,  place,  material,  parts,  quantities  or  qualities,  or 
by  use  of  machinery  of  differing  character  and  capacity, 
can  only  be  ascertained  by  cost  records  being  analysed 
on  a  qualitative  as  well  as  a  quantitative  basis. 

Systems  of  Cost  Accounting  which  permit  of  the  ascer- 
tainment of  cost  in  the  terms  of  the  required  coefficients, 
can  only  result  from  close  co-operation  between  the 
technicians  of  industry  and  trade,  and  the  accountant. 
The  results  enable  the  accountant  to  supply  the  scientific 
economist  and  the  practical  man  of  business  with  those 
"  economics  of  actuality "  which  enable  the  economist  to 
survey  the  business  world  and  surmise  the  economic 
tendencies  of  the  times,  and  enable  the  practical  man 
of  business  to  apply  the  ascertained  facts  of  his  trade  to 
the  development  of  such  modifications  and  improvements 
in  material  or  method  as  may  seem  to  be  both  desirable 
and  possible. 

When  costs  are  ascertained  through  the  co-operation 
of  industrial  technicians  and  accountants  they  can  best  be 


12  FOREWORD. 

expressed  for  other  than  purely  financial  purposes  in 
algebraic  formulae,  through  which  it  is  possible  to  translate 
general  principles  into  terms  of  quantitative  and  qualitative 
analysis. 

Cost  Accounting,  as  Mr.  Miles  Taylor  *  has  well  pointed 
out,  is  the  audit  of  activities,  recording,  analysing,  com- 
paring, interpreting,  and  demonstrating,  dependable  factors 
and  tendencies,  or,  as  put  by  Mr.  Dick  f  in  algebraic 
formulae,  Cost  is  expressed  as  a  function  of  certain  inde- 
pendent or  interdependent  variables,  and  from  this  function 
the  consequences  of  changes  in  the  variables  can  be 
predicted. 

The  methods  of  Cost  Accounting  to  be  employed  to 
achieve  these  results  have  not  found  expression  to  any 
large  extent  as  yet  in  practice,  but  more  general  recogni- 
tion is  now  being  given  by  economists,  industrialists,  and 
accountants  to  tlie  desirability,  in  large  undertakings,  of 
Cost  Accounting  being  carried  out  with  more  scientific 
accuracy  than  is  as  yet  the  case, 

*  "  Business  Organisation  and  Management."     Pitman. 

t  "The  Economics  of  Works  Costs."     John  R.  Dick,  B.Sc,  M.I.C.E. 


CHAPTER  I. 

INTRODUCTORY. 

With  the  rapid  and  continuous  development  of  the  modern 

Factory  System  there  has  arisen   a  need  for  regulations 

which  would   not    have   had   application  when 

The  modern  ,       . .  .     ,  ,  .      , 

Factory  production  was  carried  on  under  a  comparatively 

simple  industrial  organisation.  By  the  aid  of 
machinery  the  specialisation  of  labour  is  now  carried  to  an 
extent  which  usually  involves  the  passing  of  an  article 
through  as  many  hands  or  machines  as  there  are  processes 
in  its  production,  and  renders  a  further  extension  of  routine 
and  registration  necessary.  Under  manual  labour  a  simple 
form  of  accountancy  sufficed  to  ascertain  the  cost  of  working 
up  material.  Guided  by  observation,  and  doubtless  by  some 
rudimentary  account  keeping,  Walter  de  Henley,  about  the 
year  1240,  with  the  object  of  increasing  production,  intro- 
duced into  agriculture,  the  oldest  of  all  the  industries,  the 
principle  of  leaving  one  field  out  of  three  fallow,  and  led 
the  way  to  the  recognition  of  the  principle  of  rotation  of 
crops  as  now  practised  in  agriculture.  Intricate  accounting 
was  not  required  in  connection  with  the  production  of 
articles  under  a  system  of  domestic  or  cottage  industry, 
or  under  the  early  type  of  the  Factory  system  dating 
from  the  time  of  Henry  VH.,  when  master  manufacturers, 
weary  of  municipal  and  guild  restrictions,  organised 
little  communities  in  country  places  solely  for  industrial 
purposes,  and  so  arranged  as  to  afford  greater  scope  for 
the  combination  and  division   of  labour.*     Although  the 

*  "The  Industrial  History  of  England,"     Gibbins.     London:  Methuen. 


14  INTRODUCTORY. 

divisions  overlap,  and  examples  of  each  systenn  still 
survive,  the  predominant  system  in  England  up  to  the 
Norman  Conquest  was  the  Family  system,  followed  by  that 
of  the  Guild  from  about  1066  to  1450,  the  Domestic  system 
from  1450  to  1750,  and  thereafter  the  Factory  system.  The 
industrial  conditions  of  society  have,  however,  been  changed 
by  the  introduction  of  steam,  of  electric  power,  and  by  the 
continuously  increasing  extent  to  which  it  is  found  econom- 
ical to  expend  large  sums  in  the  installation  of  machinery. 

Under  these  conditions  employers  find  it  economical  to 
adopt  methods  of  supervision  and  of  registration  which, 
prima  facie^  make  production  more  costly.  The  advant- 
ages of  the  saving  of  labour  by  the  use  of  machinery,  and 
of  the  combination  of  labour — of  each  workman  confining 
himself  to  one  process,  and  that  always  the  one  for  which 
he  is  best  fitted — are  so  great  that  the  expenses  of  the 
necessary  organisation  are  insignificant  in  comparison. 
Experience  has  shown  that  wherever  the  magnitude  of  the 
operations  renders  it  practicable,  every  further  extension 
of  this  principle  of  specialisation  results,  in  spite  of  the 
increased  expense  of  administration,  in  economic  advantage. 

The  legislation  with  regard  to  factories  and  workshops, 
regulating  the  employment  of  children  and  women  and  their 
hours  of  labour,  as  well  as  providing  for  their  health,  educa- 
tion, and  safety,  the  legal  restrictions  with  regard  to  adult 
employees,  the  necessity  of  providing  compensation  for 
accidents  arising  out  of,  or  in  connection  with,  their  em- 
ployment, and  regulations  with  regard  to  contributions  to 
health  and  unemployment  insurance,  afford  but  some  of 
the  many  indications  of  the  complexity  of  the  methods 
of  organised  production  which  now  obtain.  Although  these 
changes  in  our  industrial  arrangements  have  already  been 
fraught  with  many  far-reaching  consequences,  both  material 
and  moral,  they  have  been  of  comparatively  recent  growth. 


DEFINITION    OF   FACTORY   ACCOUNTS.  1 5 

"  In  the  course  of  little  more  than  a  century  the  indus- 
trial   framework    of  the   whole   civilised  world    has    been 
radically  reconstructed,  and  more  changes  have 
System:  its    occurrcd    in    consequence,  even   more   obvious 

history.  -^ 

and  tangible  changes — changes  conspicuous 
upon  the  very  face  and  features  of  the  country  itself — than 
for  certainly  the  whole  of  the  previous  thirteen  hundred 
years.  But  it  is  only  quite  recently  that  any  endeavour 
has  been  made  to  trace  the  continuity  of  the  various  im- 
pulses, historical  and  economical,  that  have  been  concerned 
in  the  evolution  of  this  particular  method  of  production."  * 

Under  these  circumstances,  it  is  perhaps  not  surprising 
that  systems  of  regulating  the  intricate  affairs  pertaining 
to  a  factory  have  until  recently  been  determined  entirely 
by  empirical  methods. 

Although  the  term  Factory  Accounts  may  be  familiar, 
and  its  meaning  sufficiently  evident  to  persons  acquainted 
Misconcep-  ^'^^  manufacturing  business,  or  experienced  in 
factor*  *°  ^"y  operations  requiring  records  to  be  kept  of 
books.  materials,  plant,  wages,  the  use  of  machinery, 

and  stock,  yet  it  is  not  infrequently  assumed,  even  by 
accountants,  that  the  ordinary  commercial  method  of  book- 
keeping by  double  entry,  without  the  special  subsidiary 
books  which  every  trade  demands,  suffices  for  every  kind 
General  of  busincss.     The  fundamental  principles  appli- 

oj'book'-*  cable  to  accounts  necessarily  hold  good  through- 
paftlcufa*"**  o'Jt  all  the  branches  of  book-keeping ;  but 
trades.  many  businesses    involve,  in    addition    to   the 

mercantile  transactions  familiar  to  every  one  acquainted 
with  the  routine  of  an  office  or  counting-house,  multifarious 
and  often  extensive  operations,  of  which  the  employment 
of  labour  and   payment   of  wages,  the  purchase  of  raw 

*  "Introduction   to   a   History   of  the  Factory  System,"  by  R.  Whately 
Cooke  Taylor.     London  :  Bentley. 


l6  INTRODUCTORY. 

materials  and  their  conversion  into  manufactured  commodi- 
ties by  the  use  of  machinery,  and  the  organisation  and 
supervisory  work  in  connection  therewith,  are  but  some  of 
the  outward  manifestations  ;  and  for  their  proper  registra- 
tion special  methods  of  book-keeping  have  to  be  devised. 
Require-  ^"  ^^^  ^^^^  °^  manufacturing  firms  the  opera- 
mlnulaJtur-  tions  referred  to  call  for  careful  analyses  of 
ing  business,  expenditure,  sometimes  necessitating  the  storage 
of  large  quantities  of  various  kinds  of  raw  material,  and 
the  warehousing  of  goods  to  a  considerable  extent,  as  well 
as  the  manufacture,  purchase,  or  erection,  and  gradual 
wearing  out  of  valuable  plant  and  tools.  All  this  implies 
accurate  adjustments  of  accounts.  When  large  sums  are 
paid  in  wages,  it  is  essential,  if  the  business  is  to  be  eco- 
nomically conducted,  that  the  time  during  which  the  work- 
people are  employed  and  the  work  upon  which  they  are 
engaged  should  be  accurately  and  sufficiently  recorded. 
It  is  equally  important  that  the  material  should  be  syste- 
matically charged  to  the  work  on  which  it  is  used,  and  the 
machinery  cost  ascertained.  As  regards  the  last-mentioned 
item  of  cost,  it  has  been  well  pointed  out  by  Professor  Davis- 
son  *  that  labour  cost  without  machinery  is  a  different  thing 
from  labour  cost  with  machinery,  and  that  in  machinery 
industry  the  expense  of  working  the  machine,  as  well  as  re- 
placement charge,  must  be  included  in  the  real  labour  cost 
of  production.  It  is  only  by  means  of  systematic  records 
Profit  or  th^t  leakage,  waste,  and  fraud  can  be  prevented, 
l?dSa?'trani-  ^"""^  ^^^^  employers  can  know  the  cost  of  any 
actions.  article  of  their   manufacture,  and    be   able  to 

determine  accurately  and  scientifically,  not  merely  approxi- 
mately and  by  haphazard,  the  actual  profit  they  make  or 
loss  they  sustain,  not  only  on  the  aggregate  transactions 
during   a   given    period,    but   also    upon    each    individual 

*  "  The  Bargain  Theory  of  Wages." 


REQUIREMENTS  OF  A   MANUFACTURING   BUSINESS.      17 

transaction.*  In  a  business,  the  operations  of  which  vary 
widely  in  character,  this  special  knowledge  as  to  the 
pecuniary  result  of  a  particular  piece  of  work  is  of 
paramount  importance,  for  it  is  not  only  conceivable,  but 
very  probable,  that  the  presence  or  absence  of  this  infor- 
mation may  determine  the  policy  to  be  pursued  in  accepting 
Profitable  ^^  rejecting  large  contracts,  for  whilst  in  general 
proFitrbic  selling  or  contracting  price  is  limited  or  deter- 
branches.  mined  by  competition,  it  is  obvious  that  the 
ultimate  determining  factor  is  the  direct  cost  below  which,  in 
the  absence  of  some  equivalent  advantage  in  other  directions, 
a  manufacturer  or  contractor  will  not  knowingly  supply  for 
any  length  of  time.  A  Federal  Trade  Commission  was 
recently  appointed  in  the  United  States.  In  their  report 
(which  led  up  to  the  issue  by  the  Commission  of  a  bulletin 
entitled  "  Fundamentals  of  a  Cost  System  for  Manu- 
facturers," so  that  business  men  might  realise  that  an 
accurate  determination  of  costs  is  fundamentally  related 
to  business  efficiency),  the  Commissioners  express  the 
view  that  "the  purpose  of  conducting  a  business  is  to 
make  money,  and  the  only  way  to  make  money  is  to  sell 
something  for  more  than  it  costs.  The  first  essential,  then, 
is  to  know  the  cost.  .  .  .  Ignorance  causes  them  (the 
manufacturers)   to    make    unprofitable    prices,   which    the 

*  "  In  brief,  Cost  Accounts  are  the  key  to  economy  in  manufacture,  and  are 
indispensable  to  the  intelligent  and  economical  management  of  a  factory." 
("Cost  Accounts."     W.  Strachan.     Stevens  c5c  Haynes.) 

"  A  true  costing  system  meant  an  accurate  knowledge  of  productive  and 
operative  outlays,  and  while  that  was  a  truism,  yet  the  fact  remained  that  in 
many  undertakings  true  costs  were  unknown.  It  was  generally  possible  to 
show  what  was  the  actual  cost  of  labour  and  material  used  on  a  particular 
piece  of  work,  but  that  was  only  part  of  the  cost.  Then  had  to  be  added  a 
proportion  of  machine  and  shop  charges  and  general  administration  expenses, 
as  well  as  interest  on  capital,  so  that  the  departmental  manager  .  .  .  woukl 
be  able  properly  to  measure  his  cost  with  that  of  an  outside  manufacturer." 
Sir  William  Plcndcr.     Accountant,  February  7,  1914. 

C 


l8  INTRODUCTORY. 

manufacturer  who  does  not  know  his  cost  is  forced  to 
meet."  The  merchant  or  middleman  has  endeavoured  to 
buy  from  the  manufacturer  at  the  lowest  price  he  could 
get  him  to  accept,  and  has  endeavoured  to  sell  to  the 
retailer  or  user  at  the  highest  price  which  competition 
with  other  manufacturers  permitted.  In  the  future,  owing 
to  changes  in  circumstances,  the  selling  price  of  com- 
modities will  probably  stand  in  more  close  and  direct 
relation  to  cost  of  production  than  hitherto,  and  cost 
accounts  will  provide  the  bases  for  estimates  or  tenders. 
In  the  computation  of  this  cost,  allowance  for  the  deprecia- 
tion of  wasting  assets,  must  necessarily  enter. 

The  lack  of  knowledge  of  cost  often  meant  that  manu- 
facturers unwittingly  have  been  selling  below  it,  but  have 
considered  their  price  remunerative,  because  on  the  whole 
their  business  was  profitable.  The  tendency  in  large  organ- 
isations to  combine  the  productive  and  distributive  func- 
tions emphasises  the  need  for  "  larger  knowledge  of  cost  in 
the  productive  department,  larger  knowledge  of  prices  in  the 
distributive  department,  larger  knowledge  even  of  foreign 
cost  of  production."*  As  Professor  Sir  VV.  J.  Ashley 
has  forcibly  pointed  out,  whatever  the  price  above  or  below 
cost  at  which  it  may  be  wise  at  any  particular  moment  to 
sell,  it  is  most  desirable  that  the  manufacturer  should  know 
what  his  goods  do  in  fact  cost  him.f  There  is  always  a 
danger,  when  only  the  general  result  of  a  business  is 
known,  of  departments  or  processes  which  are  relatively 
unremunerative  being  unduly  fostered,  and  of  those  which 
yield  more  than  the  average  profit  not  receiving  adequate 
attention.  Employers  should  not,  as  is  too  frequently  the 
case,  be  entirely  dependent  upon  the  periodical  profit  and 

*  H.  John  Falk,  "  On  Changes  in  Trade  Organisation."    Ecoiioiiitijottrtial. 
+  Professor  W.  J.  Ashley,   "The  Enlargement  of  Economics."     Economic 
Journal,  June  1908. 


STOCK   KNOWABLE   WITHOUT   SURVEY.  19 

loss  accounts  for  their  knowledge  as  to  the  financial  result 
of  their  transactions,  but  should  at  any  time,  and  at  any 
stage  of  manufacture,  be  able  to  ascertain, /;'£' /cz;//^',  rapidly 
and  reliably,  the  actual,  and  not  merely  the  estimated,  cost 
of  production  of  any  given  article  of  their  manufacture. 
They  should  also  be  able  to  determine,  without  the  delay 
and  labour  of  a  survey  or  inv-entory,  the  quantity  of  stock 
and  of  raw  material  on  hand,  or  of  any  particular  item  or 
part  thereof  It  would  be  discreditable  to  any  cashier  if 
stock  should  his  principal  could  not  ascertain  by  a  glance 
without**'**''  at  the  books  the  amount  of  cash  in  hand,  but 
survey.  found  it  nccessary  to  have  the  money  counted  ; 

and  there  can  be  no  reason  why  the  same  punctilious  book- 
keeping should  not  be  adopted  in  the  case  of  goods.  It  is 
not  too  much  to  say  that  for  a  manufacturing  or  trading 
concern  to  be  well  organised,  the  storekeeper  or  ware- 
houseman should  be  able  to  state,  by  referring  to  his  Stores 
or  Stock  Ledgers,  the  actual  quantities  of  any  kind  of 
material,  or  stock,  on  hand  with  the  same  facility  and 
precision  as  the  accountant  can  ascertain  from  the  books 
the  balance  at  the  bankers,  or  the  amount  of  securities 
in  the  safe.  By  means  of  detailed  records  of  cost  accu- 
rately compiled,  and  carefully  considered  and  criticised, 
purchases  of  stores  and  expenditure  of  wages  may  be 
regulated,  production  facilitated  and  increased,  economies 
introduced,  and  the  business  thereby  placed  on  an  improved 
competitive  and  profit-earning  basis. 

The  advantages  of  systematic  factory  accounting  are 
now  receiving  recognition  in  all  industrial  countries. 
Professor  Laurence  R.  Dicksee,  M.Com.,  F.C.A.,  has 
pointed  out  that  there  appears  to  be  a  "  widespread  belief 
that  Cost  Accounts  were  invented  in  the  United  States 
and  introduced  into  this  country  by  Sir  S.  H.  Lever, 
K.C.B.,  when  he  came  over  to  place  himself  at  the  disposal 


20  INTRODUCTORY. 

of  the  Ministry  of  Munitions.  The  impression  is  as  rehable 
as  are  most  popular  impressions,  and  it  would  not  be  worth 
combating,  but  for  the  fact  that  one  never  quite  knows 
what  may  be  the  consequences  hereafter  of  wrong  ideas 
concerning  the  history  of  any  important  movement."  As 
stated  in  the  Preface  (dated  February  1887)  to  the  first 
edition,  the  authors  of  this  book  believe  that  this  was 
"  the  first  attempt  to  place  before  English  readers  a 
systematised  statement  of  the  principles  regulating  Factory 
Accounts."  Papers  on  various  aspects  of  the  matter  had 
been  read  before  various  societies  from  time  to  time.  One 
branch  of  the  subject  had  been  ably  dealt  with  in  a  paper 
on  "The  Balance  Sheets  of  Manufacturing  Firms:  Their 
Principles  and  Theories  Viewed  Analytically,"  read  by  its 
author,  the  late  Mr.  F.  R.  Goddard,  Public  Accountant  of 
Newcastle,  before  a  meeting  of  the  Cleveland  Institute  of 
Engineers  on  January  16,  1872.  This  paper,  through  the 
courtesy  of  Mr.  F.  R.  Miller,  Chartered  Accountant,  of 
Manchester,  the  authors  had  an  opportunity  of  perusing 
for  the  first  time  in  1916.  Mr.  A.  Lowes  Dickinson, 
C.P.A.,  F.C.A.,  in  an  address  at  the  annual  meeting  of 
the  American  Association  of  Public  Accountants,  held  at 
Atlantic  City,  New  Jersey,  in  1908,  summarised  the 
principal  objects  to  be  attained  by  a  modern  cost  system 
as — 

(i)  To  ascertain  the  cost  of  the  same  product  at  different 
periods  in  the  same  mill,  or  at  the  same  periods  in  different 
mills,  and  so  to  remedy  inequalities  in  cost  by  reducing  all 
to  the  results  shown  by  the  best. 

(2)  By  an  accurate  ascertainment  of  the  cost  of  output 
to  maintain  running  book  inventories  which  will  show  at 
any  time,  without  a  physical  inspection,  how  much  of  each 
class  of  materials,  supplies,  etc.,  is  on  hand,  and  so  reducing 


ASSIMILATION    OF   ACCOUNTS.  21 

stocks  and  capital  invested  to  the  lowest  state  consistent 
with  efficiency,  and  at  the  same  time  avoiding  the  delay, 
expense,  and  interruption  to  business  consequent  upon  the 
old  method  of  taking  a  complete  physical  inventory  at  a 
specific  date  in  each  year. 

(3)  The  preparation  of  statistical  information  as  to  costs 
of  parts,  quantity,  and  variety  of  output,  relative  efficiency 
of  different  classes  of  labour,  and  relative  costs  of  labour 
and  material,  between  different  mills  and  periods. 

(4)  The  preparation  of  periodical  statements  of  profit 
and  loss  in  a  condensed  form,  readily  giving  directors  all 
material  information  as  to  the  results  of  the  business. 

Mr.  Dickinson  considers  the  last  as  the  least  important 
of  the  objects  aimed  at,  and  that  the  cost  of  a  system 
designed  merely  to  produce  periodical  statements  of  profit 
and  loss,  v.'ithout  providing  for  the  other  and  far  more 
important  objects  enumerated  under  the  first  three  head- 
ings, may  be  considered  as  money  thrown  away. 

Professor  Sir  S.  J.  Chapman,  M.A.,  M.Com.,  formerly 
Dean  of  the  Faculty  of  Commerce  at  the  Victoria  Univer- 
sity of  Manchester,  has  pointed  out  that  developments 
in  Cost  Accounting  have  rendered  possible  measurements 
which  were  not  possible  before,  and  that  without  these 
the  scientific  management  of  productive  enterprises  is 
not  possible.* 

These  are  only  a  few  of  the  questions  which  present 

themselves    in   a  cursory  consideration  of  the 

and  dcprc-     nature  of  Factory  Accounts.     The  subject  of 

Cost  admits  of  very  varied  treatment.     In  its 

consideration    it   has   to   be   borne   in    mind   that   in  the 

absence  of  an  agreed  definition,  unless  certain  distinctive 

*  Lecture  delivered  before  the  Manchester  Chartered  Accountants'  Students' 
Society,  October  26,  1914. 


22  INTRODUCTORY. 

words  are  prefixed,  different  impressions  may  be  conveyed 
to  different  minds.  When  the  incidental  charges  and 
depreciation  are  of  a  more  or  less  fixed  character,  it  may 
be  sufficient  to  know  the  cost  of  an  article  in  wages  and 
materials  only;  but  if  the  use  and  wear  and  tear  of  plant  and 
incidental  expenses  form  a  more  direct  element  in  the  cost 
of  production,  and  manufacturing  cost  has  to  be  ascertained, 
it  is  highly  desirable  to  apportion  such  items  over  the 
product  or  over  the  various  operations  or  departments. 
The  allocation  of  these  charges  thus  presents  many  interest- 
incidental  irig'  problems,  whilst  the  numerous  methods  of 
charges.  « ^yj-jj-j^g  off"  and  of  determining  the  proper 
incidence  of  items  such  as  deterioration  of  plant,  tools, 
buildings,  or  similar  assets,  deserve  the  serious  attention  of 
owners  of  property,  and  tax  to  no  mean  degree  the  abilities 
of  accountants,  and  their  power  of  obtaining  an  absolutely 
accurate  statement  of  affairs.  In  the  widest  sense  Cost  is 
all  that  part  of  the  selling  price  which  is  not  profit. 

For  the  above-mentioned  purposes,  among  others, 
systematised  factory  books  are  essential.  The  advantage 
of  such  books,  clearly  representing  the  actual  state 
of  affairs,  is  particularly  evident  when  a  business  is  for 
Sale  of  busi-  disposal  ;  or  is  being  converted  from  a  private 
ncss,  etc.  ^j.^^  jj-j^^  ^  joint  stock  Company,  or  when  the 
whole  or  some  part  of  the  factory  has  been  destroyed  by 
fire,  and  it  is  necessary  to  prepare  a  claim  on  insurance 
companies.  The  figures  in  the  commercial  books  then 
require  to  be  substantiated  in  detail.  There  is  little  doubt 
Moral  cKcct  ^^^o  that  under  a  well-organised  system  of 
count*s***upon'  Factory  Accounts,  each  employee  should  feel 
employees,  ^j-j^^  j-^g  jg  contributing  to  the  attainment  of 
accurate  records  of  costs  ;  and  that  it  is  necessary  that  his 
account  of  the  time  he  spends,  and  the  material  he  uses, 
should    be   adequate   and    precise.      This    begets   general 


ORDINARY   COMMERCIAL   BOOK-KEEPING.  23 

confidence  in  the  manner  in  which  the  accounts  are  kept, 
and  on  occasion  of  strikes  or  reduction  of  wages,  or 
negotiations  for  fixing  wages  by  means  of  a  sHding  scale 
based  on  selhng  prices — a  principle  adopted  in  many 
industries,  notably  the  coal  and  iron  trades,  in  the  last 
quarter  of  the  nineteenth  century,  but  which  has  now 
fallen  somewhat  out  of  favour — employees  have  less 
hesitation  in  accepting  the  results  shown  by  the  books 
as  correct  and  as  based  on  fair  principles. 

It  will  be  seen,  even  from  this  superficial  summary,  that 
it  is  not  feasible  to  record  accurately,  and  with  requisite 
Ordinary  detail,  in  the  ordinary  commercial  books,  all 
boSkTIn^-'*^  the  numerous  entries  necessary  for  the  proper 
adequate.  registration  of  the  operations  of  a  large  manu- 
facturing establishment.  It  is,  moreover,  essential  that 
factory  books  should  have  columns  for  time  spent  in 
labour,  for  the  hours  machinery  is  in  use,  and  for  the 
weight  or  measurement  of  materials  and  the  number  of 
articles,  in  addition  to  cash  columns  for  values  ;  and  these, 
which  are  an  indispensable  condition  in  factory  books, 
would  not  serve  any  useful  or  practical  purpose  in  com- 
mercial books,  but  would  on  the  contrary  mar  their  utility. 
The  insufficiency  of  the  commercial  books  alone  to 
represent  the  transactions  is  conspicuously  evident  in  the 
case  of  railway,  gas,*  and  water  companies,  and  large 
industrial  undertakings.  The  factory  books  record  the 
home  trade  and  manufacture  of  the  business,  the  commercial 
books  its  external  transactions. 

Factory  books  must  not  be  considered,  as  is  often  the 
case,   to    be    merely   memoranda    books,   which    are    not 

*  The  statutory  form  of  accounts  for  Gas  Companies  is  prescribed  by 
Section  35  and  Schedule  B  of  the  Gas  Works  Clauses  Act  of  1871,  whilst 
that  for  Railways  is  prescribed  by  the  Railway  Returns  and  Accounts  Act  of 
1911. 


24  INTRODUCTORY. 

necessarily  required  to  balance.*  The\'  should  so  assimilate 
to  the  books  of  the  counting-house  that  the  obvious 
Assimilation  advantage  is  not  sacrificed  of  having  a  balance- 
of  all  books,  gheet  made  up  from  the  General  Ledger  which 
embraces,  or  verifies,  or  is  in  part  verified  by  the  balances 
of  the  ledgers  and  books  kept  in  the  stores  and  warehouses. 
No  matter  how  far  the  subdivision  of  departments  of  an 
establishment  be  carried,  or  to  whatever  extent  the 
principle  of  localising  the  book-keeping  be  applied,  the 
concentration  of  the  accounts — the  merging  of 

Spcc'alisa-  ,  i   i         i  i      i  •  r         •  r 

tion  consis-    the  departmental  books  and  the  verification  oi 

tent  with  ,  -  .  •  i  /-^  i 

conccntra-  the  manufacturing  accounts  in  the  General 
Ledger — should  be  kept  constantly  in  view. 
There  is  not  any  special  theoretical  or  practical  difficulty  in 
establishing  a  separate  set  of  books  for  each  and  any  of  the 
departments,  if  it  be  not  attempted  to  make  the  proper 
working  of  all  dependent  upon  the  proper  working  of  each, 
or  if  no  regard  be  had  to  the  necessity  of  attaining  the 
highest  degree  of  efficiency  and  despatch  with  the  minimum 
expense.  On  the  other  hand,  to  devise  upon  sound  principles, 
and  to  carry  out  efficiently  and  economically,  a  sj'stem  of 
accounts  which  necessitates  the  departmental  book-keeping 
in  a  large  establishment  being  subsidiary  to  one  centre,  is 
a  science  as  well  as  an  art.  That  a  system  is 
clerical  not  ccouomical  which   is   inefficient   is   but   a 

truism,  and  although  we  appreciate  the  im- 
portance and  the  necessity  of  minimising  clerical  labour, 
there  is  no  occasion  to  lay  particular  stress  upon  this  con- 
sideration, as    the  tendency  is   to   dispense  with   services 

*  "  The  Cost  Accounling  Books  should  never  be  considered  as  something 
separate  and  apart  from  the  regular  set  of  books  of  a  concern  ;  hey  should 
not  be  considered  as  inferior  nor  superior  to  the  commercial  and  financial  books, 
but  they  should  in  all  cases  be  an  integral  part  of  the  established  system." — 
Professor  H.  C.  M.  Vedder  in  The  Business  IVorld  on  "  Cost  Accounting." 


VIGILANCE   OVER    EXPENDITURE.  25 

which  an  adequate  recognition  of  the  value  of  sound 
book-keeping  would  probably  show  to  be  indispensable. 
Book-keepers  and  clerks  being  only  indirectly  engaged 
in  the  production  of  wealth,  are  often  regarded  as  "  unpro- 
ductive "  workers — using  the  expression  not  invidiously, 
but  in  a  sense  in  which  some  economists  employ  it. 
The  routine  of  the  office  is  often  limited  by  the  number 
of  clerks  from  time  to  time  engaged,  instead  of  the 
system  of  accounts  and  routine  best  adapted  for  the 
business  being  determined  on,  and  a  staff  employed 
proportionate  to  the  work  to  be  done.  The  wisdom  of 
initiating  b)-  the  dismissal  of  one  or  more  clerks  the 
retrenchment  which  in  times  of  depression  may  be  called 
for,  is  not  always  apparent.  The  maintenance  of  a  perfect 
organisation  may  enable  economies  to  be  practised,  in 
comparison  with  which  the  whole  cost  of  the  office  staff  is 
insignificant.*  It  is  well,  therefore,  to  weigh  carefully  the 
pro  and  con  before  relaxing  vigilance  over  expenditure  and 
the  salutary  checks  upon  wastefulness  and  extravagance  in 
Division  of  manufacture  which  a  good  s}-stem  of  accounts 
work.  affords.      One    of    the    disadvantages    of    in- 

sufficient records  being  kept  is  that  book-keepers  and  clerks 
haveoften  to  spend  much  time  in  obtaining  from  foremen  and 
workmen,  after  the  event,  information  which  should  reach 
the  counting-house  in  a  regular  and  systematic  manner. 
This  is  contrary  to  the  principle  that  true  economy  is 
to  be  found  in  ihe  specialisation  of  labour,  and  in  clerks 
devoting  themselves  to  clerical,  and  foremen  and  workmen 

*  "  The  frequently  expressed  fear  of  increased  clerical  expense  is  largely 
imaginary.  Good  costing  is  not  an  expensive  luxury.  Any  reasonable 
expense  is  found  in  practice  to  be  fully  compensated  by  many  savings  and 
economies  and  real  gain  in  efficiency.  Cases  exist  of  a  sound  system  being 
worked  by  fewer  clerks  than  were  required  to  handle  a  mass  of  worthless 
makeshifts."' — "Cost  Records,  or  Factory  Accounting.''  John  Mann,  jun., 
M.  A.C.A.,  "  Encyclopaedia  of  Accounting." 


26  INTRODUCTORY. 

to  more  directly  productive  work.  The  expense  of  clerical 
work  involved  in  Cost  Accounting  may  often  be  much 
reduced  by  the  use  of  mechanical  aids  such  as  Time 
Recorders  and  Calculagraphs.  In  many  large  organisations 
the  term  "  Costing "  is  applied  to  the  work  performed  by 
technical  estimating  departments,  in  which  estimates  but 
not  records  of  costs  are  kept,  and  the  monthly  results  are 
from  time  to  time  compared  with  the  financial  accounts,  and 
as  far  as  possible  a  reconciliation  obtained  between  them, 
and  the  results  of  the  estimates  taken  to  be  correct  if,  for 
purposes  of  control,  the  percentage  of  difference  is  negligible. 
The  task  we  have  set  ourselves  is  to  explain  the  nature 
The  scope  of  ^^  factory  books  and  the  method  of  keeping 
this  work.  them,  and  to  show  the  operation  whereby  the 
subdivision  and  localisation  of  the  accounts  may  be 
made  consistent  with  the  system  of  book-keeping  by 
Ordinary  double-entry  obtaining  in  the  counting-house. 
bookT"ot**  ^Ve  do  not  propose  to  enter  upon  a  detailed 
explained.  explanation  of  the  Ledger,  Journal,  and  Cash 
Book,  and  of  the  subsidiary  books  which  constitute  the 
system  of  commercial  accounts  whether  kept  on  the  Loose 
Leaf,  Card,  Slip,  or  other  systems,  and  whether  mechanical 
devices  such  as  Hollerith  machines  are  or  are  not  adopted.* 
The  numerous  excellent  treatises  extant  on  general  book- 
keeping render  this  needless,  and  we  shall  assume  on  the 
part  of  our  readers  that  acquaintance  with  the  elements  of 
the  subject  which  is  essential  to  a  proper  understanding  of 
factory  and  other  accounts.  For  this  reason  chiefly  we  do 
not  think  it  necessary  to  follow  the  precedent  of  writers 

*  An  interesting  description  of  Book-keeping  on  the  Slip  and  Card  System 
is  given  in  the  lecture  by  E.  E.  Price,  F.C.A.,  delivered  to  the  Newcastle 
Chartered  Accountants'  Students'  Society  in  1906.  The  Hollerith  machines 
are  described  in  a  series  of  articles  on  "  Accountancy  and  Machinery,"  which 
appeared  in  The  Accountant  in  January  and  February  1915. 


GENERAL  APPLICABILITY   OF   BOOKS.  2J 

on  commercial  book-keeping  by  tracing  the  entries  of  an 
imaginary  firm  through  a  series  of  model  books.  We  do 
Specimen  ^lot  hesitate,  however,  to  give  specimen  rulings 
rulings.  Q^  ^^   books    and    forms   suggested    in    these 

pages   for   adoption,   and    for    facility   of  reference   these 
specimens  are  numbered  consecutively,  as  indeed  should  be 
the  case  in  actual  practice.     In  this  connection 

Exterior  of       .  in- 

books  and      it  may  be  well  to  point  out  that  some  regard 

distinguish"        ,ii,ti  i  •  riii 

able  fea-        should  be  had  to  the  exterior  of  the  books,  an 

advantage  being  derivable  from  the  books  of 

each  department  or  of  each  class  being  distinguishable  by 

their  bindings.    Similarly  papers  of  different  colours  should 

be  used  for  the  various  forms  suggested,  while 

General  ap-      ....  i  i  i-  •   i         i 

piicabiiity  their  rulings  and  headings  may  with  advantage 
be  printed  in  copyable  ink.  As  in  the  majority 
of  businesses  the  articles  dealt  in  are  reckoned  in  weight,  we 
think  it  well  to  show  the  specimen  rulings  with  weight 
columns.  As  it  is  not  possible  to  show  the  specimen 
rulings  of  books  applicable  to  every  trade,  we  show  only 
those  of  one  class.  Slight  alterations  in  headings  make 
these  rulings  applicable  to  trades  using  other  measures,  for 
the  principles  on  which  they  are  based  are  equally  applic- 
able to  the  liquid  and  mixing  trades,  such  as  those  of 
brewers,  distillers,  manufacturing  chemists,  and 

Diagrams.  i        i         •      i  • 

others,  as  well  as  to  paper  and  other  industries 
in  which  there  is  a  continuous  production  of  one  kind  of 
commodity,  or  to  other  enterprises  where  there  are  a  number 
of  processes  or  varying  classes  of  products.*    The  principles 

*  "A  clear  perception  of  the  similarities  and  dissimilarities  is  one  of  the 
great  essentials  to  the  practice  of  factory  accounting.  The  fundamental  prin- 
ciple is  always  the  same,  namely,  the  practice  of  making  a  record  sufficiently 
full  to  constitute  a  clear  accounting  for  the  factory  expenditure,  and  the  object 
of  the  accounts  is  always  the  same,  namely,  to  eliminate  waste  from  the 
operations." — "Factory  Accounting  as  Applied  to  Machine  Shops."  John 
Whitmore.     /ournal  of  Accou7itancy.     New  York. 


28  INTRODUCTORY. 

enunciated  are  applicable  to  the  ascertainment  of  all 
manufacturing  costs,  whether  production  is  on  a  "unit"  or 
multiple  of  a  unit  basis,  on  a  "job"  or  separate  cost  for 
each  product  basis,  or  on  a  "  standard "  or  "  test "  cost 
basis  in  which  cost  is  ascertained  with  precision  in  a 
particular  case,  and  the  result  taken  as  a  basis  for  average 
costs.  The  relation  of  the  various  books  to  each 
other  will  be  found  further  elucidated  by  the  diagrams 
at  the  conclusions  of  Chapters  II.,  III.,  IV.,  and  VIII., 
showing  the  manner  in  which  the  books  and  forms 
assimilate  to  each  other  and  converge  into  the  Com- 
mercial Ledger. 

Whilst  not  presuming  to  suggest  that  the  forms  and 
books  of  which  specimen  rulings  are  given  apply  uni- 
versally and  are  incapable  of  modification  either  by 
subdivision  or  concentration,  we  believe  that  the  prin- 
ciples underlying  them  are  of  general  application,*  and 
that  the  rulings  will  serve  as  useful  examples,  the 
cardinal  principle  to  be  observed  being  that  the  form 
of  the  records  should  be  conducive  to  the  easy  alloca- 
tion of  expenditure  to  the  object  on  behalf  of  which  it 
was  incurred. 

In  the  next  chapter  we  deal  with  the  subject  of  Labour, 
defining  the  requisites  of  a  proper  wages  system  ;  and 
explaining,  in  as  much  detail  as  seems  needful,  the  purpose 
Outline  oT  o^  ^^6  books  and  the  nature  of  the  routine 
contents.  u^hich  in  our  opinion  should  be  adopted  by 
manufacturers.  It  will  then  be  necessary  to  explain  the 
forms  it  is  desirable  to  observe  in  connection  with  the 
purchase  and  consumption  of  materials  for  the  purpose 
of  manufacture,  or  the  maintenance  of  buildings  and  the 

*  This  belief  has  been  proved  lo  be  well  founded  by  the  number  of  books 
that  have  been  issued  in  recent  years,  applying  these  principles  in  the  formu- 
lation in  detail  of  cost  systems  applicable  to  special  industries. 


OUTLINE   OF   CONTENTS.  29 

upkeep   and    renewing    of    machinery   and    plant.      The 
question    of    Stores    and    the   manner    of    deaUng    with 
the  invoices  for  goods   purchased  will   next  demand   our 
attention.       In    this    connection    we    shall    have   occasion 
to   explain    the  uses  of  the  Stores   Ledger  and  its  rela- 
tion   to    the   subsidiary    stores    books    and    to    the    Com- 
mercial   Ledger.       Having   considered    the   book-keeping 
and    routine   relating   to   the   expenditure  of  labour  and 
material    for    the    purpose    of    the    direct    production    of 
commodities,  or  for  the  working,  maintenance,  and  renewal 
of  machinery  and  plant  whereby  direct  labour  is  saved  or 
supplemented,  we  shall  be  in  a  position  to  consider  the 
important  books  in  which  this  expenditure  is  concentrated, 
analysed,  and  properly  apportioned  to  the  resultant  objects. 
The  books  by  means  of  which  this  is  accomplished  are  the 
Cost  Books.     Their  object  is  to  enable  a  manufacturer  to 
ascertain  the  cost  to  him  of  any  given  operation,  and  thus 
afford  him  some  of  the  principal  data  for  the  conduct  of 
DeFinition  of  ^^^  business.    There  are  many  systems  of  Prime 
prime  cost.     Cost  in  voguc,  but  the  writers  who  in  dealing 
with  book-keeping  generally  have  touched  upon  the  sub- 
ject, are  not  agreed  upon  the  definition  of  the  term  Prime 
Cost.       In    some    instances    the    confusion    of    ideas   and 
language  has  been  carried  so  far  as  to  render  it  necessary 
to  speak  of  net  and  gross  prime  cost.     Throughout  these 
pages   we    take    Prime   Cost   to    mean,  as    shown   in    the 
Glossary,  and  as  in  fact  the  words  imply,  only  the  original 
or    direct    cost    of    an    article    in    labour    and    material, 
including    in    labour,    charges    for    the    use    of   machinery 
when  machine  labour  takes  the  place  of  manual  labour. 
The  cost  of  maintaining  and  working  this  machinery  is 
one   of  the   facts    ascertained    through   the    Cost   Books. 
This  cost,  supplemented  by  a  provision  for  the  necessary 
replacement,  has  to  be  distributed  over  the  purposes  for 


30  INTRODUCTORY. 

which  it  is  incurred  through  the  Plant  Books  recording 
the  working  of  the  machinery.  Cost  of  production  we 
define,  as  we  have  defined  it  since  1887,  as  the  total 
expenditure  incurred  in  the  production  of  a  commodity. 
The  term  "  Factory  Cost "  is  often  used  as  synonymous 
with  it*  In  earlier  editions  of  this  work  we  called  the 
books  referred  to  the  Prime  Cost  Books  or  Prime  Cost 
Ledgers,  but  we  made  provision  for  the  inclusion  therein 
of  machinery  and  other  charges.  In  the  previous  edition 
the  rearrangement  of  chapters  consequent  upon  our  more 
exhaustive  consideration  of  the  subject  of  charges  for 
machinery,  aided  thereto  as  we  have  been  by  the  efforts 
of  those  who  have  followed  us  in  this  field  of  inquiry, 
made  it  desirable  to  allude  to  those  books  as  Cost  Books 
or  Cost  Ledgers,  and  thereby  avoid  the  misconception 
which  an  adherence  to  the  original  titles  might  involve. 

The  sale  or  distribution  of  manufactured  commodities 
and  the  resultant  "Marketing  Costs"  will  next  be  dealt 
Distinction  with,  and  at  this  point  we  think  it  well  to 
sfj^s^and  draw  a  clear  distinction  between  materials  for 
stock.  manufacture  and  articles  in  the  manufactured 

state.  Until  materials  are  converted  into  manufactured 
articles  we  speak  of  them  as  stores,  but  when  so  converted 
they  are  termed  stock  ;  and  the  book-keeping  we  recom- 
mend is  based  on  this  view.  The  accounts  in  the  Cost 
Ledgers  are  debited  with  wages  and  materials  spent  in 
manufacture,  with  charges  for  use  of  machinery,  and  with 
the  general  expenses  due  to  them,  and  are  credited  with 
the  stock  produced.     The  importance  of  this  distinction 

*  In  a  lecture  delivered  at  the  London  School  of  Economics  in  1918, 
Mr.  A.  E.  Goodwin,  Secretary  of  the  Federation  of  Master  Printers, 
stated  that  the  printers  were  indebted  to  Mr.  A.  A.  Austin  Leigh  for  the 
definition  of  Cost  as  "The  sum  of  all  the  expenses,  direct  or  indirect,  measured 
in  the  production  of  a  given  article."  Luorporated  Acioiiftianfs  Journal, 
December  191S. 


OUTLINE   OF   CONTENTS.  3 1 

between  stores  and  stock  will  be  evident  when  the  subject 
is  dealt  with  in  detail.  The  eighth  chapter  treats  of  the 
Stock  Books,  which  though  in  some  respects  analogous 
in  their  functions  to  the  Stores  Books,  are  as  distinct  from 
them  as  is  consistent  with  the  principle  of  a  system  by 
which  all  the  books  of  the  establishment  are  required  to 
merge  into  the  Commercial  Ledger,  or  to  verify,  or  be 
verified  by  them. 

This  practically  completes  the  outline  of  what  constitutes 
the  absolutely  essential  books  in  a  system  of  Factory 
Accounts,  but  there  are  many  other  matters  which  have 
too  important  a  bearing  upon  the  subject  of  this  work  to 
admit  of  being  passed  over  without  reference.  Such  are 
the  questions  of  surveys  or  inventories,  and  the  numerous 
subsidiary  books  that,  for  the  better  understanding  of  the 
accounts,  are  required  in  the  management  of  factories,  and 
for  the  consideration  of  the  economic  effect  of  various 
methods  of  remunerating  labour.  These  matters  are  dealt 
with  in  subsequent  chapters.  On  the  question  of  surveys 
or  stocktaking,  we  do  not  presume,  in  view  of  the  varying 
requirements  of  different  trades,  to  do  more  than  to  offer 
some  more  or  less  obvious  suggestions  which  have  a 
general  application. 

The  Appendices  contain  a  reprint  of  a  paper  on  the 
advantages  derivable  from  the  use  of  symbolic  nomen- 
clature for  parts  of  machines,  some  notes  on  the  law  of 
rating  of  factories  containing  machinery,  table  for  deter- 
mining the  amounts  to  be  provided  for  the  amortisation  of 
leases,  and  a  glossary  of  some  of  the  terms  used  in  this 
book. 


CHAPTER    II. 

LABOUR. 

The  initial  step  in  the  organisation  of  a  factory  must 
perforce  be  the  adoption  of  a  system  by  which  each  person 
employed  at  a  rate  of  pay  on  a  time  scale  shall 
systcm^the  rcceivc  payment  for  the  exact  time  employed. 
thc'orga^ni-  Such  a  systcm  should  necessarily  be  one  in 
factory!*  *  which  the  workpeople  have  confidence,  and  in 
which  they  themselves  co-operate. 
In  the  present  chapter  we  describe  the  methods  of 
recording  the  hours  worked  by  each  employee  either  auto- 
matically by  means  of  mechanical  "  Time 
wa*geYsys-  Rccorders,"  or,  in  the  case  of  small  factories 
miTe^cTror.  o^  workshops,  which  are  still  more  numerous 
chapt^rr^  ***  than  the  larger  undertakings,  by  means  of 
written  time  records.  We  show  also  how 
either  of  these  records,  through  the  instrumentality  of 
the  leading  hand  in  the  shop  and  of  the  time  clerk,  may 
be  compared,  checked,  and  if  need  arise,  be  corrected.  By 
these  means  the  possibility  of  an  error  either  by  over  or 
under  payment  is  reduced  to  a  minimum,  whilst  fraud 
necessitates  for  its  successful  perpetration  the  connivance 
of  the  employee,  the  timekeeper,  the  leading  hand  of  the 
shop  in  which  such  employee  works,  the  time  clerk,  and 
of  the  clerk  in  the  counting-house  who  makes  up  the 
Wages  Book,  and  also  of  the  cashier  who  pays  the 
wages.  Such  collusion  is  very  improbable,  although  not 
impossible. 


"DUMMY   MEN."  33 

Further,  we  show  that,  by  means  of  a  weekly  return,  it  is 
impossible  for  anyone  connected  with  either  the  counting- 
house  or  the  factory  to  enter  in  the  books  wages  for 
"dummy  men."  This  phrase  is  used  to  designate  such  a 
system  of  fraud  as  can  only  exist  in  a  large  undertaking 
where  it  is  possible  for  the  foreman,  the  time- 

Creation  of  ,  i      i  •  ,  .       i 

dummy  men    keeper,  Or  the  pay  clerk,  either  smgly  or  m 

prevented  ^    .  \     -^  '  ,        ■'    . 

conspiracy,  to  show  a  larger  number  of  men 
employed  than  is  actually  the  case. 

By  the  use  of  the  same  return,  fraud  through  the 
unauthorised  alteration  of  the  rates  of  pay  of  the  work- 
wcckiy  re-  people  is  prevented,  and  the  authorised  rate 
alteration       recorded  for  future  reference.     The  regulation 

rate.  ^^^   recording   of  piecework    prices,    and    the 

payment  of  piecework  balances  to  those  employees  who 
have  been  paid  during  the  continuance  of  piecework  at 
time  rates,  is  described ;  as  are  also  the  modes  of  controlling 
time  made  outside  the  factory  and  of  preventing  undue 
recourse  to  overtime. 

It  is  then  shown  how  deductions  may,  if  required,  be 
made  from  the  wages  of  the  employee,  fines  imposed  for 
non-observance  of  rules,  or  other  causes,  for  rent,  or  in 
Sick  and  rcspect  of  saviugs  bank,  sick,  superannuation, 
other  funds.  ^^  other  funds  ;  or  of  the  amounts  of  adverse 
balances  on  piecework,  of  the  deductions  authorised  by 
the  Factory  Acts,  and  of  those  obligatory  under  the 
National  Health  Insurance  and  Unemployment  Acts,  with 
regard  to  sickness  and  unemployment.  Attention  is  called 
to  the  fact  that  the  Wages  Book  may  be  correctly  and 
concisely  compiled  from  these  various  returns,  and  that  it, 
in  its  turn,  may,  if  thought  well,  be  summarised  for  the  use 
of  the  principal  into  a  more  condensed  form. 

The  possibility  with  very  little  trouble  of  obtaining 
receipts  from  employees  is  dealt  with,  provision  against  the 

D 


34  LABOUR. 

misappropriation  of  unclaimed  wages  suggested,  and  con- 
sideration given  to  the  mode  of  payment.  The  work  of 
Receipts  ^he  time  clerk  in  reference  to  the  systematic 
Dutut^o*"  allocation  of  the  wages  for  the  Cost  Books, 
time  clerk,  ^j-j^-j  q|-  ^|^g  timekeeper  or  other  employee  in 
reference  to  the  records  required  by  the  Factory  Acts, 
is  explained.  The  necessity  of  compiling  a  list  of  addresses 
and  of  obtaining  information  as  to  the  character  of  em- 
ployees, as  well  as  some  miscellaneous  matters,  are 
incidentally  dealt  with. 

At  the  entrance  to  a  factory,  or  to  a  section  or  sections 

of  a    factory,  there    is    almost    invariably  found    a   small 

building,  where  the  time  of  the  entry  and  exit 

Time  oHice         ^  ,  .  •  ,  ,  •  , 

and  time        of  cvcry  employee  is  registered  by  means  either 

recorders.  .  .  ,  ,       , 

of  automatic  time  recorders  or  clocks,  or 
manually  by  a  gate  or  timekeeper.  As  a  general  rule,  the 
clocks  make  an  automatic  record  of  the  time  of  one  em- 
ployee on  a  card  or  sheet,  or  make  a  record  of  the  times 
of  several  employees  on  the  same  sheet.  Before  describing 
the  working  of  these  recorders  and  the  routine  in  connection 
with  the  registration  of  the  record  slips,  it  will  be  convenient 
to  describe  the  older  method  of  time  registration  which  still 
survives  in  many  of  the  smaller  factories,  and  in  building 
and  kindred  industries.  In  these  cases  the  time  is  ob- 
tained by  each  employee,  on  entering  the  factory,  being 
required  to  pass  the  time  office  and  mentioning  the  number 
which  has  been  allotted  to  him  at  the  commencement  of 
his  engagement,  receiving  from  the  timekeeper  a  metal 
check,  tally,  or  other  ticket,  bearing  his  number,  and 
taken  from  a  board,  on  which  the  checks  have  previously 
been  consecutively  arranged.  In  some  cases,  in  order 
to  save  time  the  employee  is  allowed  to  take  his  own 
check  from  the  board. 


REGISTRATION    OF   TIME.  35 

On  leaving  the  factory  the  employee  deposits  this  check 
in  a  box  placed  outside  the  time  office.  The  checks  are 
sorted  by  the  timekeeper,  and  can,  in  any  case  of  doubt  or 
dispute,  be  compared  with  the  entries  made  by  him  in  a 
book  which  is  hereafter  described.  The  checks  having 
been  again  placed  on  the  board,  the  process  referred  to  is 
repeated  each  time  the  workpeople  enter  or  leave  the 
premises.  In  some  cases  separate  check  boards  are  used 
for,  and  a  different  series  of  numbers  are  allotted  to,  each 
department,  and  different  sizes  or  shapes  of  checks  are 
used  for  each  shift. 

Should  a  mess-room  have  been  provided  for  the  use  of 
the  employees  there  will  not  be  any  obstacle  to  the  carry- 
ing out  of  the  system  if  the  mess-room  is  out- 
Mess-room.      .  ,  ,  ,11        ,         ,      ,  ,  .    . 
side   the  timekeepers    lodge,  but  should  it  be 

situated  inside  the  works,  the  checks  can  be  issued  from 
that  point  after  meal  hours. 

After  admitting  the  workpeople,  the  timekeeper  proceeds 

to  register  their  time.     He  sees  by  the  presence  or  absence 

of  checks  on  the  board  which  employees  are,  or 

Method  of  ...  ,  ,         ,  ,     , 

keeping  time  are  not,  in  the  factory.  In  a  book  so  ruled  as  to 
show  each  employee's  name  and  number,  and 
each  day  of  the  week  divided  into  four  parts  (for  the  time 
made  before  breakfast,  where  such  time  is  worked,  after 
breakfast,  after  dinner,  and  overtime,  or  such  other  divisions 
as  may  be  most  suitable  for  the  business),  the  timekeeper 
enters  the  employees  present.  This  is  in  most  cases  done  by 
a  vertical  stroke,  absence  being  denoted  by  a  horizontal  one. 
In  some  cases  the  four  divisions  of  time  above  referred  to 
are  shown  in  the  form  of  a  square,  thus  D ;  or  in  cases  where 
three  divisions  only  are  required,  by  means  of  a  triangle, 
thus  A.  In  the  square,  the  top  stroke  is  supposed  to 
represent  the  time  before  breakfast,  the  down  stroke,  right 
hand,  that  after  breakfast,  the  base  the  time  after  dinner, 


36 


LABOUR. 


•a 

9 

H 

>< 

•a 

c 
o 

B 

•a 

3 

•a 

u 

9 

H 

1 

-^ 

^ 

--- 

•a 

B 

■a 

-- 

1 

1 

-^ 

S 
2 

6 
5^ 

and  the  up-stroke,  left  hand,  any 
overtime  that  may  be  made.  In 
the  triangle  the  down  stroke,  left 
hand,  is  presumed  to  represent  the 
first  division  of  time,  the  base  the 
second,  and  the  up  stroke,  right 
hand,  the  third.  In  printing  the 
book  the  various  lines  of  the  square 
or  angle  may  be  faintly  printed, 
and  when  entries  are  made,  inked 
over  completely  or  partially,  as 
required. 

Absence  during  any  or  all  of 
these  divisions  is  of  course  made 
apparent  by  the  omission  of  the 
stroke  or  strokes.  Specimens  Nos. 
I,  2,  and  3  show  a  Time  Book  so 
ruled. 

In  large  establishments  auto- 
matic time  recorders,  whereby  the 
employee  makes  his  own  record, 
are  now  generally  used.  The  re- 
corder generally  takes  the  form  of 
clock-work  mechanism  placed  at 
the  entrance  to  the  factory,  or  to 
the  various  departments  or  floors, 
fitted  with  a  slot  into  which  the 
employee  drops  a  card  bearing  his 
number,  and  pulling  a  lever  causes 
a  record  to  be  taken  of  the  time 
at  which  he  enters  or  leaves  the 
works.  The  card  is  generally 
printed  to  last  a  week,  and  the 
machine  so  designed  that  the  slot 


REGISTRATION    OF   TIME.  37 

rises  automatically  day  by  day,  thus  corresponding  with 
the  spacing  on  the  card.  The  cards  are  not  retained  by 
the  employees,  but  on  entry  are  taken  by  them  from 
numbered  places  or  pocket  slips  on  the  one  side  of  the 
clock,  and  are  afterwards  deposited  in  corresponding 
places  on  the  other  side.  When  leaving  the  factory  the 
process  is  reversed.  In  the  case  of  time  clocks  which 
record  the  time  of  several  employees  on  one  sheet,  the 
employee  on  arrival  or  departure  turns  a  ke}'  bearing 
his  number  in  the  clock  once,  as  if  winding  it,  thus 
ringing  a  bell  which  indicates  that  the  time  and  date 
have  been  printed  in  the  register  the  clock  contains.  The 
record  slips  are  summarised  in  a  Time  Book,  in  the 
same  way  as  the  records  obtained  by  checks,  and  it  is 
desirable  that  they  should  be  retained  for  purposes  of 
reference  over  the  ensuing  pay  day,  in  case  of  dispute. 
In  cases  where  there  are  a  number  of  shops,  some  a  con- 
siderable distance  from  the  main  entrance,  the  clocks  are 
placed  at  the  entrance  of  the  shops,  thereby  ensuring  that 
the  time  recorded  is  that  at  which  the  employee  commences 
work ;  but  when  men  are  working  overtime  or  at  odd 
times,  the  record  is  usually  taken,  as  a  measure  of  pre- 
caution, on  the  time  clocks  at  the  main  entrance.  An 
arrangement  whereby  in  some  recorders  the  arrivals  at 
regulation  times  are  registered  in  one  colour  and  late 
arrivals  in  another,  has  in  practice  much  to  recommend  it. 
These  time  records,  apart  from  their  utility  in  building  up 
the  pay-sheet,  can  also  be  utilised  for  costing  purposes,  and 
are  specially  serviceable  in  connection  with  jobbing  costs. 
The  "Rochester,"  "  Dey,"  "  Bundy,"  and  the  "Empire," 
or  "  Gledhill  Brook,"  are  among  the  time  recorders  at 
present  most  largely  used. 

If  the  employees  are  working  in  two  or  three  shifts  a 
separate  Time  Book  may  be  used  for  each  shift ;  or  one 

47645 


38  LABOUR. 

book  may  be  so  ruled  as  to  take  all  three  returns.  It 
may  be  desirable  at  irregular  intervals  to  change  the 
Double  or  timekeepers  from  one  shift  to  another  to  lessen 
treble  shift,  chances  of  collusion.  The  time  of  the  work- 
people who  are  admitted  into  the  works,  or  allowed  to 
leave,  at  intervals  between  any  of  these  divisions,  may 
be  shown  by  a  red  ink  note  of  the  number  of  minutes  or 
hours'  difference  between  the  time  at  which  they  should 
have  presented  and  did  present  themselves  for  admittance 
and  departure,  or,  if  the  square  and  the  triangle  are 
adopted,  by  recognised  shortenings  of  the  strokes.  The 
time  at  which  employees  are  admitted  into  the  works  if 
late  in  arriving,  will  follow  prescribed  rules.  No  employee 
should  be  allowed  to  leave  work  at  an  irregular  time  unless 
provided  with  a  permit  or  "  pass  out "  note  signed  by  his 
foreman,  setting  out  the  cause  of  such  permission. 

In  some,  and  particularly  in  the  larger,  establishments, 
the  functions  of  gatekeeper  and  timekeeper  are  quite  dis- 
tinct. The  gatekeeper  attends  to  the  opening  and  closing 
of  the  gates,  to  the  various  callers  thereat,  and  often  records 
the  times  of  the  entry  and  exit  of  members  of  the  staff  and 
of  visitors.  So  far  as  regards  the  time  records,  his  duty 
consists  in  opening  the  gates  at  the  prescribed  times,  seeing 
that  each  employee  admitted  receives  or  takes  off  the  time 
board,  or  puts  into  the  time  box,  as  the  case  may  be,  one 
check  only,  closing  the  time  box  at  the  regulation  hour,  and 
forwarding  it  to  the  timekeeper.  It  will  be  seen  that  the 
general  principle  of  recording  the  time  is  the  same  whether 
checks  are  given  to  the  employees  or  taken  by  them  from 
the  time  board  or  clock  as  they  enter  the  works,  and  are 
deposited  by  them  on  leaving,  or  are  deposited  by  them 
on  entering  and  taken  up  on  leaving  the  works. 

In  the  building  and  the  contracting  industries  in  con- 
nection   with    the   clearing   of  sites,  and  the  erection  of 


REGISTRATION    OF   TIME.  39 

buildings,  a  simple  method  of  timekeeping  is  sometimes 
adopted  in  which  the  employee,  who  is  given  a  number, 
simply  repeats  that  number  to  the  timekeeper  when 
entering  or  leaving  the  premises,  and  the  presence  of  the 
workmen  is  recorded  by  means  of  different  coloured  lines 
representing  the  various  turns  of  duty  which  are  drawn 
in  the  square  representing  the  employee's  number.  The 
Time  Book  is  ruled  across  with  spaces  for  the  ten  primal 
units,  with  a  side  ruling  for  tens  and  multiples  of  ten.  By 
these  means  a  compact  and  diagrammatic  record  is  obtained 
which  when  well  kept  seems  to  well  serve  the  compara- 
tively elementary  time  recording  which  such  class  of  work 
necessitates. 

If  it  be  deemed  desirable  to  have  a  record  of  the  em- 
ployees who  periodically  absent  themselves,  it  may  be  kept 
Absentee  "^  ^"  Absentee  Book  ruled  to  show  the  names 
Book.  Qf  those  away  on   any   particular  day,  and  to 

bring  out  prominently  the  names  of  those  who  are  most 
frequently  absent.  The  same  principle  may  be  applied  in 
recording,  by  means  of  a  Time  Lost  Book,  the  names  of 
those  who  are  unpunctual.  At  each  four-weekly  or  other 
period  these  absentee  and  time  lost  records  should  be 
summarised  under  names,  trades,  and  times,  and  the  fore- 
man should  record  the  steps  taken  in  individual  cases. 

It  may  also  be  desirable  to  keep  a  similar  record  as  to 
overtime  (Specimen  No.  4),  and  so  prevent  resort  to  it 
becoming  chronic  in  the  case  of  individuals,  trades,  or 
departments. 

Having  thus  booked  the  time,  entry  by  entry  and  day 
by  day,  the  timekeeper  at  the  conclusion  of  the  week  or 
fortnight,  as  the  case  may  be,  proceeds  to  cast  across  and 
enter  in  the  column  provided  the  total  time  made  by  the 
employee  during  such  period,  and  then  forwards  the  book 
to  the  office. 


40 


LABOUR. 

TIME  BOOK.— Specimen  No.  2. 


So. 

Name. 

Trade. 

Wed. 

Thurs. 

Fri. 

Sat. 

Sun. 

Mon. 

Tues. 

Total 
Hours. 

A 

A 

A 

A 

A 

A 

z 

TIME 

BOOK.— Specimen 

No.  3 

No. 

Name. 

Trade. 

Wed. 

Thurs. 

Fri. 

Sat. 

Sun. 

Mon. 

Tues. 

Total 
Hours. 

D 

u 

c 

n 

n 

n 

D 

OVERTIME  BOOK.— Specimen  No.  4. 


Date. 

Employe's 
No. 

Time. 

Hours 
worked. 

Allowance. 

Total 
Time. 

Remarks 
as  to 
work. 

From 

To 

i 

J     Double. 

i 

A  "  time  sheet,"  "  working  sheet,"  or  "  operation  card," 
or  some  otherwise  designated  form  of  record  being 
supplied  to  or  provided    for   each   employee,  or  a  group 


TIME   RECORD   SHEETS. 


41 


of    employees,    there    is    recorded    on    it,   in    consonance 

with  the  instructions  received  from  the  foreman,  a  record 

of  how  the  day's  time  is  spent,  giving  in  two 

Use  of  cm-  .  111  ,  r     L 

pioycc's  time  or  three  words,  or  m  symbols,  the  nature  01  the 
record  work,  the  number  of  the  order  (if  for  plant  or 

buildings,  called  the  working  order  number ;  if 
for  manufacturing  any  commodities,  the  manufacturing 
or  stock  order  number),  and  the  time  spent  thereon.     In 

TIME  RECORD  SHEET.— Specimen  No.  5. 

Name No. . 


Day. 

Nature  of  Work. 

Order 
No. 

Time.                          1 

Ordinary. 

Over. 

Piece 
Work. 

Day 
Work. 

Piece 
Work. 

Day 
Work. 

some  cases  the  employees  arc  supplied  with  sheets  or  cards, 
in  book  or  portfolio  form,  but  perforated  for  each  day's  use. 

These  time  records,  if  used  for  more  than  one  day's 
work,  are  perhaps  most  convenient  if  written  on  a  form 
which  can  be  easily  gummed  at  one  end  to  a  board.  On 
these  forms  or  time  slips  it  is  well  to  have  two  divisions 
ruled — the  one  for  a  record  of  ordinary  time,  the  other  for 
overtime.  The  forms  used  for  different  shops  or  different 
classes  of  workmen  may  be  distinguished  by  initial  letters 
or  signs  ;  or,  as  previously  suggested,  by  the  use  of  paper 
or  cards  of  different  colours  or  tints. 

In  some  cases  when  a  card  is  used  it  is  found  convenient 


42  LABOUR. 

to  have  it  perforated  so  that  each  piece  of  work  done  is 
entered  between  the  perforations,  and  the  card  split  up  and 
used  in  the  same  way  as  the  time  sh'ps  hereafter  referred  to. 
It  is  sometimes  practicable  to  issue,  or  for  employees  to 
take,  one  of  these  cards  for  each  operation  from  a  rack  near 
the  foreman's  desk  in  the  shop,  and  by  means  of  a  Time 
Register  to  record  automatically  the  time  at  which  a  certain 
order  was  commenced  and  finished,  the  employee  placing  the 
card  in  another  rack  when  the  completion  of  the  order  has 
been  automatically  recorded.  Some  of  these  Registers,  such 
as  the  Calculagraph,  automatically  record  the  time  spent 
on  the  work,  as  well  as  the  time  it  was  started  and  finished. 
The  Calculagraph  can  be  used  in  many  ways  and  for  many 
purposes.  It  is  desirable,  however,  in  cases  in  which  it  is 
used  to  arrange  that  the  operator  who  thus  keeps  his  own 
time,  shall,  when  the  piece  of  work  on  which  he  is  engaged 
is  completed,  record  his  time  in  the  presence  of  the  foreman 
who  would  pass  the  work  as  being  properl)'  done.  In 
works,  the  branches  or  departments  of  which  are  widely 
separated,  the  distribution  of  cost  records  or  vouchers  is 
much  facilitated  by  the  use  of  the  Pick-up  Mechanical 
Messenger,  or  two  or  more  Calculagraphs  can  be  used, 
located  at  points  within  easy  distance  of  which  the  work 
is  carried  on. 

The  records  should  be  initialled  by  the  shop  foreman 
or  leading  hand,  and  afterwards  copied  by  the  time  clerk 
into  a  Time  Allocation  Book.  In  a  business  in  which 
the  work  is  highly  specialised,  and  in  which  the  employee 

is  engaged  on  one  piece  or  form  of  work  only, 
cords,  when  and  on  that  for  some  considerable  time,  it  is 
Prime  Cost     possible,  and  may  be  found  advantageous,  to  use 

these  time  slips  as  the  direct  sources  of  entry 
in  the  Cost  Books  *  instead  of  the  wages  being  analysed 
*  See  Chapter  IV. 


TIME   RECORD   SHEETS.  43 

in  the  manner  described  later.  It  is  essential  that  in  either 
case  the  total  entries  made  in  the  Cost  Books  on  account 
of  wages  should  agree  with  the  total  wages  expended. 

The  Time  Allocation  Book  previously  referred  to  is 
Time  Aiioca-  ^^^^  ^P  ^Y  ^he  time  clerk  and  forwarded, 
tion  Book,  at  the  end  of  each  payment  period,  to 
the  office. 

The  two  records  of  time  made,  viz.,  the  Time  Book  (as 

prepared  by  the  timekeeper)  and  the  Time  Allocation  Book 

(as  entered  from   the  employee's  own  records, 

VcriFication     ^  ,  .    ,  ...,,,,  ,        ,        ,.  ,  ,n 

of  time  which  are  mitialled  by  the  leadmg  hand),  are, 

return.  -^  is  />  > 

when  sent  to  the  office,  compared,  and  in  cases 
where  differences  arise,  explanations  obtained  by  the 
Wages  Book  clerk  from  the  employee  or  the  timekeeper. 
Should  the  explanation  then  given  not  be  satisfactory,  or 
should  it  not  be  received  in  time,  it  is  incumbent  on  the 
clerk  making  up  the  Wages  Book  to  see  that  the  employee, 
pending  the  settlement  of  the  question,  is  paid  only  for 
the  lesser  number  of  hours.  In  cases  in  which,  owing  to  a 
breakdown,  or  inability  of  a  leading  hand  or  foreman  im- 
mediately to  start  an  employee  on  another  order  on  com- 
pletion of  that  on  which  he  has  been  engaged,  and  there 
is  a  discrepancy  between  the  time  of  the  employee  in  the 
Time  Book  and  in  the  Time  Allocation  Book,  the  time  not 
profitably  employed  should  be  charged  to  a  Waste  account. 
In  some  cases  the  employee  is  provided,  where  time  is  lost 
through  causes  beyond  his  control,  with  a  Lost  Time 
Ticket,  which  is  charged  up  to  a  Waste  or  a  Lost  Time 
account. 

A  suggested  form  for  a  Time  x-^llocation  Book,  which  may 
be  ruled  so  as  to  take  the  records  for  a  week,  fortnight,  or 
month,  is  shown  (Specimen  No.  6).  Considerable  economy 
in  clerical  work  arises  from  considering  the  year  to  consist 
of  13  periods  of  4  weeks  each,  so  as  to  avoid  the  number  of 


44 


LABOUR. 


I 
O 

o 

o 

H 
o     t< 

<J 

:^ 
i-i 

H 


& 

n 

u 
« 
.o 

s 
i 

In 

O 

O     ^ 

0 

0 
.2       M 

O 

o  t 

O 

(5^ 

4; 

^  E 

H 

D     ^ 

apportionments  necessary  to 
give  the  results  per  calendar 
month.  If  this  method  is 
adopted,  it  is  only  at  the 
beginning  and  end  of  the  year 
that  it  is  necessary  to  appor- 
tion wages  for  a  different 
period  than  that  shown  by 
the  Wages  Book. 

Where  employees   are  en- 
gaged outside  the  factory  or 
works  for  any  con- 

Employccs         .   ,  ,  . 

outside  siderable  period, 

and  are  unable  to 
present  themselves  at  the 
time  office  on  commencing 
or  finishing  work,  it  is  desir- 
able to  have  an  Out-works 
Time  Record  Sheet  (Speci- 
men No.  7),  which  the  leading 
hand  on  the  premises  where 
the  work  is  being  carried  on 
is  asked  to  sign  as  a  guaran- 
tee of  the  time  being  correctly 
recorded. 

This  Time  Record  serves 
as  an  authority  to  the  time- 
keeper for  the  necessary  en- 
tries in  his  book.  In  the 
margin  of  that  book  it  is 
stated  that  the  time  was 
made  outside  the  factory  or 
works,  the  place  and  date 
being  also  shown.     The  time 


OUT-WORKS   TIME    RECORD   SHEET. 


45 


clerk  will  treat  this  Time  Record  Sheet  as  equivalent  to 
the  Time  Slip  or  Board  previously  alluded  to. 

It  is  well  to  draw  the  special  attention  of  the  customer 
for  whom  work  is  being  done  outside  the  factory  to  the 
request  that  he  will  note  in  the  "  Remarks  "  column  any 
overtime    made   by   his    order,  as    many   seem    either   to 

OUT-WORKS  TIME  RECORD  SHEET.— Specimen  No,  7, 
Workman's  No.  Name 


Date 

19      . 

Day. 

Where 
engaged. 

Desciiption 
of  Work. 

Order 

No. 

From 

To 

Time 
Worked 

Remarks. 

H. 

M. 

H. 

M. 

N.B. — In  all  cases  where  possible  this  sheet  must  be  signed  by  the  person 
for  whom  the  work  is  being  done,  or  his  representative,  and  must  be  posted 
so  as  to  reach  the  time  clerk  by a.m.,  on day. 


(Reverse  side.) 


19 


To_ 


We  shall  be  obliged  by  your  seeing  that  the 
other  side  of  this  Time  Sheet  is  correctly  filled  up  as  regards 
the  time  of  arriving  at  and  leaving  your  premises  ;  and, 
havmg  done  so,  by  your  signing  the  same. 

Should  you  desire  overtime  to  be  made  please  enter  in 
the  "  Remarks  "  column  that  it  is  done  at  your  request. 

As  these  regulations  are  made  to  prevent  mistakes  and 
abuses,  we  trust  they  will  have  your  kind  attention. 


46 


LABOUR. 


I. 

3 

H 

s 

H 

s 

3 

•3        0 

O     ^ 

r) 

a 
o 

a 

s  1 

w| 

1      d 
O     ^ 

a 

3 

c 

:^  1 

H 

X  1 

^      d 
O     ^ 

T3 

a 

H 

s 

w 

1     d 
O     ^ 

i 

s  1 

K  1 

1      d 
O     ^ 

>> 
<« 

"S 

u 

a 

J3 

H 

a 

S 

ai 

u 

^   d 

o    ^ 

-a 

c 

a 

S 

K 

o  ^ 

d 
o 

'% 

a. 

3 

u 
u 

O 

a 
It 

■o^s.utuiJiJOjvv 

°     1 
K      O 

o 

3 
0 

S 
< 

3 

o 
H 

d 

d 

•3}E>I 

6 

6 
d 

aujiqjdAQ 

suiviaAQ 

Xeq 

d 

•alEH 

3mi^9AQ 

Acq 

d 

•S}E^ 
9UII)JJAO 

•a 
2 

H 

d 

RETURN    OF   OVERTIME.  47 

ignore  or  be  ignorant  of  the  fact  that  the  higher  rate 
generally  paid  for  overtime  adds  very  considerably  to  the 
cost  of  the  work  and  sometimes  to  the  amount  charged 
for  it. 

The  economic  aspects  of  overtime  in  relation  to  fixed 
capital  are  dealt  with  in  a  subsequent  chapter.  For  our 
Return  of  present  purpose  it  suffices  to  say  that  if  the 
overtime.  employer  desires  to  keep  a  check  upon,  and 
to  reduce  to  a  minimum,  the  overtime  that  is  worked,  he 
should  require  the  foreman  or  leading  hand  to  send  to 
the  office  at  the  end  of  each  period  of  payment  a  return  of 
overtime  made  (Specimen  No.  8),  in  addition  to  giving  an 
"  overtime  slip,"  or  authority  to  work  overtime  to  an 
employee,  to  be  handed  to  the  timekeeper. 

This  return  is  initialled  by  the  foreman  or  leading  hand 
to  show  that  the  overtime  has  been  sanctioned,  and  the 
clerk  making  up  the  Wages  Book,  to  whom  the  return  is 
handed,  sees  that  no  overtime  other  than  that  shown 
therein  is  allowed  to  pass  through  that  book. 

Instructions  can  be  given  either  to  the  time  clerk  or 
to  the  Wages  Book  clerk,  or  to  both,  to  prepare  a  state- 
ment showing  the  amount  spent  on  overtime  in  excess  of 
the  amount  that  would  have  been  paid  had  the  same  work 
been  done  at  ordinary  rates.  Where  the  resort  to  over- 
time is  on  account  of  general  pressure  of  work,  and  not 
on  account  of  the  pressing  nature  of  a  specific  order,  the 
allowance  for  overtime  would  seem  more  correctly  charge- 
able to  a  general  expenses  account  than  to  a  particular  order. 

This  return  can  simply  show  the  amount  paid  in 
excess  in  each  trade  or  to  each  individual,  or  it  can  be 
in  a  more  complete  form,  as  shown  in  Specimen  Ruling 
No.  9.  It  is  desirable  that  the  extra  cost  of  working 
overtime  should  be  noted  in  the  cost  records  against  the 
various  orders  on  which  it  is  incurred. 


48 


LABOUR. 


PIECE-WORK  RET  URN. -Specimen  No.  io. 

Week  ending 19 

Workman's  Name  No. 


Rate 


Started  on 


.1  19      .  at_ 


Foreman. 


Order  No. 

Reg.  No. 

Quantity. 

Description  of 
Work. 

Rate. 

I 

s. 

d. 

Date. 

His. 

Date. 

Hrs. 

Date. 

Hrs. 

Date. 

Hrs. 

Oveitime 

Allowancei. 

Wednesd.iy 

Thursday 

Friday 

Saturday 

Monday 

Tuesday 

1 

Last  Piece-rate 


Last  percentage  on  Day-work_ 


Total  time_ 
Balance 


at 


Percentage  on  Day-work 


Signature  of  Woikman 

No.  received  as  above 

Signature  of  Piece-work  Clerk 

Balance  entered  in  Wages  Book_ 


Foreman. 


19 


Exd. 


Time  Clerk, 


PIECEWORK   RETURN.  49 

In  factories  where,  owing  to  the  soHdarity  of  labour,  a 
large  number  of  men  and  women  are  unable  to  commence, 
or  fully  carry  out,  their  work  unless  a  smaller  number  of 
men  or  women  of  a  particular  trade  are  present,  it  is  some- 
times found  advisable  to  ensure  the  greater  punctuality  on 
the  part  of  the  smaller  number  by  instituting  a  system  of 
fines  for  late  and  of  premiums  for  early  attendance.  Thus 
the  man  who  was  punctual  would  get  his  premium  and 
wages  for  the  time  made,  whilst  the  unpunctual  man  would 
be  fined,  besides  losing  pay  for  the  time  he  was  absent.  In 
some  cases  a  system  of  voluntary  fines  is  resorted  to,  em- 
ployees purchasing  from  the  gatekeeper  tickets  recording 
the  rule  which  has  been  broken,  and  the  amount  paid  in 
connection  therewith.  The  amount  so  contributed  is  often 
used  at  regular  intervals  for  festive  or  charitable  purposes. 
Care  should  be  taken  in  connection  with  any  system  of 
fines  instituted  that  the  provisions  of  the  Truck  Acts  are 
respected.  The  number  of  times  each  employee  is  un- 
punctual is  reported  to  the  office  by  the  timekeeper,  and 
can  of  course  be  checked  from  the  Time  Books  and  record 
slips,  if  thought  necessary.  The  amount  of  premium  or 
fine  in  each  case  would  then  be  passed  through  the 
Wages  Book. 

The  economic  position  in  industry  under  pre-war,  and 
still  more  so  under  post-war,  conditions  has  led  to  increased 
advocacy  of  the  application  in  some  industries  of  methods 
of  wages  payments  based  on  results.  Considerable  opposi- 
tion was  manifested  toward  the  adoption  of  some  of  the 
earlier  devised  piecework  systems,  but  the  strength  of  the 
objection  to  the  principle  has  been  lessened  by  the 
modifications  made  in  them,  whereby  the  advantages  of 
increased  production  have  been  more  equitably  shared 
between  employers  and  employees.  In  many  factories — 
boot   and   shoe,  tailoring,  coopering,  cotton   weaving,  for 

E 


$0  LABOUR. 

example — the  majority  of  the  employees  are  generally 
paid  on  piece  wages  and  not  on  time  rates.  The 
employee  is  remunerated  not  on  the  basis  of  payment 
for  time  at  a  rate  per  hour,  day,  or  week,  but  by  a  piece- 
work wage  or  specified  price  for  the  production  of 
a  standard  article,  or  the  execution  of  a  specific 
process,  both  under  normal  conditions,  with  such 
modifications  of  the  standard,  either  by  extras  or 
deductions,  as  may  correspond  with  specified  variations 
of  the  standard  product,  with  adjustments  in  the  rates 
in  case  of  defective  materials  or  tools  supplied  by  the 
employer. 

In  factories  where  employees  engaged  at  time  rates  are 

employed  on  piecework,  they  should,  when  starting  on  it, 

be  supplied  with    a    Piecework    Return    Form 

Method  of  -XT  N  u-   u     ■  -c     J    ^1 

recording       (Specimen  No.   lo),  on  which  is  specified  the 

piecework 

nature  of  the  work,  the  extent  of  the  job,  and 
the  rate  at  which  it  is  undertaken.  The  pieceworker 
on  the  completion  of  the  work  hands  this  sheet  to  a  viewer, 
having  entered  upon  it  the  number  of  hours  spent  on 
that  particular  job,  for  which  he  has  been  paid  in 
ordinary  course.  The  viewer  records  the  result  of  his 
inspection  in  a  viewing  book,  which  has  a  carbon  slip. 
This  viewing  report  will  contain  much  technical  data 
of  great  value  in  the  administration  and  management 
of  the  shops.  The  Return,  having  been  modified  or 
verified  by  the  viewer  of  the  work,  is  passed  on  to  the 
time  clerk,  who  checks  the  time  entries  made  thereon 
from  his  Time  Allocation  Book,  gives  it  monetary  form, 
and  enters  in  his  Allocation  Book  the  difference  between 
the  value  of  the  output  at  piece  rate  and  the  amount 
already  paid  at  time  rate.  Any  balances  favourable  to 
the  employee  may  be  placed  to  his  or  her  credit  at  the 
next  piecework  settlement,  whilst  adverse  balances  may 


THE   ANALYSIS   OF   PIECEWORK   COSTS.  5 1 

be  deducted  from  the  time  pay,  or  from  the  next 
favourable  balance. 

In  practice  the  latter  course  is  preferable,  as  it  prevents 
any  question  being  raised  by  representatives  of  the  trade 
union  as  to  deduction  from  time  pay  reducing  wages  below 
the  ordinary  standard  rate. 

The  provisions  of  the  Factory  Acts  and  of  administra- 
tive orders  authorised  by  the  Home  Secretary  as  to  the 
publication  of  particulars  of  piecework  rates,  or  as  to  check 
weighing,  in  certain  trades  have,  of  course,  to  be  borne  in 
mind. 

In  some  cases  it  will  probably  be  found  impracticable, 
owing  to  the  nature  or  pressure  of  other  work,  to  keep  an 
employee  continuously  on  the  work  which  he  has  taken  at 
a  piece  rate.  Under  these  circumstances  the  foreman  or 
leading  hand  should  at  once  notify  the  time  clerk,  in  writ- 
ing, that  he  has  taken  the  employee  off  piecework  and  put 
him  on  time  work.  It  may  be  found  desirable  for  the 
foreman  or  leading  hand  to  keep  a  Log  Book,  in  which 
such  interruptions  to  pieceworking  are  noted.  In  a  large 
establishment  this  function  might  be  discharged  by  the 
piecework  viewer. 

In  any  event  it  will  be  found  very  desirable  to  have  a 
record  of  interruption  to  pieceworking,  to  which  reference 
may,  if  necessary,  be  made  at  the  time  of  settlement. 

The  time  clerk,  after  duly  examining  and  vouching  the 
piecework  returns,  forwards  the  same  to  the  office,  where 
they  can  be  rechecked  in  a  general  or  detailed  manner,  if 
thought  desirable. 

Considerable  advantage  accrues  from  a  Piecework 
Analysis  or  Register  Book  being  compiled  from  these  sheets. 
As  indicated  in  Specimen  No.  ii,  such  a  book  would  show 
the  various  rates  at  which  work  was  undertaken,  as  also 
the  percentage  in  which  any  kind  of  piecework  is  favour- 


52 


LABOUR. 


rj 
S 

as 

ist  Price. 

and  Price, 
reduction 
of... each. 

Piecework 
Percentage 

on 
Day  Work. 

Amount  of 
Balance. 

Time  made. 

•paidnooo 

a 

3 
O 

a 

JO -CM 

•ON  -Al    j 

."5 

0 

iz; 

G 

} 

able  or  unfavourable  to  either  the 

employer  or  the  employee ;   and 

it    would    serve    as    a 

Piecework  i         i      •       r 

Analysis         record  or  check  in  nx- 

Book. 

mg  piecework  rates. 
From  this  source  also  comparisons 
between  the  percentage  of  piece- 
work rates  and  day-work  prices 
ruling  in  the  various  shops  or 
departments  can  be  obtained. 

Having  been  checked,  these 
piecework  balances  may  be 
entered  in  the  Wages  Book 
(Specimen  No.  14).  The  pro- 
cedure applicable  in  the  case  of 
a  pieceworker  is  also  applicable 
when  more  than  one  employee 
is  concerned  either  as 
an  assistant  or  as  a 
member  of  a  piece- 
work gang.  At  the  conclusion 
of  the  contract  the  remaining 
balance  will  be  apportioned  be- 
tween the  workers  on  the  agreed 
basis,  and  their  individual  results 
credited  to  them  in  the  wages 
sheets.  Before  passing  from  the 
subject  of  piecework  it  will  be 
desirable  to  refer  briefly  to  kindred 
methods  of  remuneration. 

In  the  United  States  of  America 
the  opposition  of  the  International 
Association  of  Machinists  is  by 
no  means  relaxed,  and  its  official 


Return  of 
n\en  en- 
gaged or 
left. 


PIECEWORK.  53 

representative  some  time  since  declared  that  the  Associa- 
tion will  never  be  a  willing  party  to  the  propagation 
of  piecework.  At  present,  in  the  States,  more  than  in 
the  United  Kingdom,  the  original  defects  of  the  piece- 
work system  are  being  modified  by  the  intensified  or 
differential  piece-rate  system,  and  the  premium  plan  of 
labour  remuneration.  The  incentive  to  quicken  produc- 
tion being  diminished  by  the  "dropping"  of  rates  when 
piecework  balances  have  been  in  the  opinion  of  the 
employer  too  largely  in  favour  of  the  employee,  some 
employers  have  adopted  the  differential  rate  system,  which 
"  consists  in  offering  for  the  same  job  a  high  price  per 
piece  if  the  work  is  done  in  the  shortest  possible  time  and 
in  a  perfect  condition,  and  lower  prices  per  piece  for  slow 
and  imperfect  work."  *  In  these  cases  it  is  not  usual  to 
fix  the  rate  primarily  on  tbe  records  which  show  the 
shortest  time  in  which  the  same  or  similar  work  has  been 
done,  but  on  the  basis  of  a  calculation  by  a  rate  fixer  as 
to  the  time  that  the  work  under  ordinary  and  average 
conditions  would  occupy  with  provision  for  higher  rate  for 
shorter  time,  subject  to  there  being  no  deterioration  in 
quality.  It  is  claimed  for  this  system  that  it  maximises 
output,  by  leaving  to  labour  the  extra  reward  of  skill  and 
application.  It  has  stood  the  test  of  time  in  various  works, 
among  others  those  of  the  Midvale  Steel  Company  of 
Philadelphia,  where  it  was  introduced  by  Mr.  Fred  W. 
Taylor,  with  whose  name  the  system  is  often  associated. 
A  modification  of  this  method  was  introduced  by  Mr. 
Gantt  at  the  works  of  the  Bethlehem  Steel  Co.  Its 
distinctive  characteristic  is  that  if  the  worker  does  not 
reach  the  standard  time,  he  is  paid  only  75  per  cent,  of 
normal  wages  for  the  excessive  time,  provided  the  bonus 
earned   permits  of  the  imposition  of  this  penalty.     The 

*  Engineering  Magazine. 


54  LABOUR. 

Gantt  and  Taylor  methods  are  not  now  very  extensively 
used.  A  system  known  as  the  Three  Rate  System  of  Com- 
pensation was  initiated  by  Mr,  Gillreth.  The  earnings  were 
divided  into  three  parts.  The  first  was  the  day  rate  which 
the  worker  received  whatever  his  efficiency.  The  second 
was  the  rate  paid  to  a  worker  performing  his  work  in 
exact  accordance  with  the  instruction  card.  The  third 
was  a  rate  paid  when  the  work  is  done  both  in  accordance 
with  the  instruction  card  and  within  the  stipulated  time. 
The  premium  plan,  which  has  been  successfully  adopted 
in  many  works,  was  the  result  of  much  care  and  thought 
given  by  Mr.  (now  Sir)  J.  A.  Halsey  to  the  problem  of 
reconciling  the  divergence  of  interest  between  employer 
and  employed  in  quickening  production.  The  basis  of 
this  plan,  often  described  as  the  time  share  method,  is  the 
continuance  of  payment  by  time,  modified  by  the  expecta- 
tion of  a  certain  minimum  product  within  that  time,  with 
a  bonus  or  premium  for  lessened  time,  which  is,  of  course, 
equivalent  to  increase  of  product.  The  direct  labour  gain 
to  the  employer  consists  of  the  difference  between  the 
premium  and  the  wages  cost  saved.  The  division  of  the 
gain  as  between  employer  and  employee  presents,  of  course, 
some  difficulty.  In  some  cases  a  certain  proportionate  part 
of  the  gain  is  allotted  to  the  employee.  Sir  J.  A.  Halsey 
himself  adopts  the  principle  of  being  liberal  with  the  time 
rather  than  the  premium  rate.  In  some  cases  special 
grants  are  made  to  foremen,  proportional  to  the  number  of 
men  earning  a  bonus  in  the  respective  shops.  In  the 
Emerson  Efficiency  System  as  applied  in  the  shops  of 
the  Santa  Fe  Railway,  the  characteristic  features  are  the 
revision  as  part  of  the  daily  shop  practice  of  any  scheduled 
prices  which  appear  to  be  too  high  or  too  low,  and 
this  without  lessening  the  earning  power  of  the  worker. 
Another  characteristic  is  the  establishment  of  a  general 


PIECEWORK.  55 

monthly  efficiency  record  covering  the  shop  as  a  whole, 
and  the  employment  instead  of  "  speeders "  and  "  task- 
setters"  of  instructors,  who  having  determined  as  nearly  as 
possible  the  standard  time  that  a  particular  piece  of  work 
should  take,  show  the  employee  how  it  should  be  worked 
out  practically. 

The  premium  plan  is  in  the  main  identical  with  the  system 
adopted  in  many  factories  and  works  in  the  United  King- 
dom under  the  name  "  gain-sharing,"  which  has  been  defined 
as*  "an  arrangement  under  which  a  fixed  or  minimum 
wage  is  supplemented  by  a  premium  proportionate  to  the 
efficiency  of  the  workman,  so  far  as  this  exceeds  a  specified 
standard."  Thus  under  the  Progressive  Rate  method,  intro- 
duced by  Mr.  Rowan,  of  Glasgow,  the  Halsey  plan  has 
been  modified  by  the  fraction  of  the  gain  receivable  by 
the  employee  being  varied  so  as  to  make  the  rate  of 
earnings  on  the  work  (time  wages  plus  premium)  exceed  the 
time  wages  rate  by  the  same  proportion  as  that  which  the 
saving  in  time  effected  bears  to  the  standard  time.f  A 
further  variation  is  to  be  found  in  the  Reference  Rate 
method,  in  which  a  total  wages  payment  calculated  upon  a 
time  allowance  is  fixed  for  a  given  quantity  of  work,  and 
if  the  employee  completes  this  in  such  time  that  his  day- 
rate  wages  come  to  less  than  the  Reference  Rate,  a  share 
of  the  saving  is  allotted  to  h\m.l 

It  will  be  found  advantageous,  and  sometimes  in  large 
establishments    indispensable,   for   a  return  or  returns  to 

*  "  Profit-sharing  and  the  Labour  Question."  By  T.  M.  Bushell.  London  : 
Methuen. 

t  An  interesting  account  of  the  variations  of  both  systems,  as  adopted  in  the 
Imperial  Dockyards  and  other  establishments  in  Germany,  is  given  in  an  article 
by  Mr.  F.  D.  Schloss  on  "Gain  Sharing  in  Germany,"  in  the  Econotnicjotirnal. 

X  Interesting  comparisons  between  the  Time  Share,  the  Progressive  Rate, 
and  Reference  Rate  methods  are  given  by  Mr.  H.  Culpin,  A.S.A.A.,  in  his 
lecture  on  Wages  Systems. 


56 


LABOUR. 


be  sent  by  the  foreman  at  regular  intervals,  either  to  the 
clerk  responsible  for  the  Wages  Book  or  to  the  principal, 
enumerating  the  names,  trades,  and  rates  of  pay  of  employees 
who  have  been  engaged  since  the  date  of  the  last  return, 
and  giving  similar  information  concerning  those  who  have 
resigned  or  been  discharged.  This  return  should  also  record 
any  increases  in  the  rates  of  pay,  any  transfers  from  one 
department  to  another,  also  the  names  of  employees  who  are 
to  be  fined  for  neglect  of  duty  or  for  any  other  cause,  of  those 
who  are  to  receive  premiums  for  some  special  reason,  or 
who  are  on  leave,  or  absent  through  illness  or  injury,  but  to 
whom  wages  or  allowances  are  to  be  paid,  and  of  those  who 
are  entitled  to  "  black  money  "  (or  "  dirty  money  "  as  it  is 
often  called),  or  other  extras,  with  the  respective  amounts. 
These  returns  should  be  duly  entered  in  a  Wages  Rate 
Wages  Rate  ^^ok  (Specimen  No.  13).  At  any  period  the 
Book.  j-^^g  Qf  p^y  entered  in  the  Wages  Book  for  all 

or  any  of  the  employees  can  be  checked  from  this  book. 


WAGES  ADVICE.- Specimen  No.  12. 
REfURN  OF  Men  Engaged,  Rfsigned,  Discharged,  Promotk.d,  Trans- 

FERKED    OR   FiNED,    AND   OF   ALLOWANCES   AND   PREMIUMS, 


Works,  for  the  Week  ending 


19 


Engaged. 


No. 

Name. 

Occupation. 

Rate. 

Name  and  Address  of  last 
Employer. 

{Specimen  continued. 


THE   WAGES   BOOK. 


57 


WAGES   ADVICE.— Specimen  No.  12— (continued). 
Left. 


No. 

Name. 

Occupation. 

Remarks. 

Promoted  or  Transferred. 


No. 

Name. 

Occupation. 

1       From 
1 

To 

Rate. 

Remarks. 

From 

To 

Fined. 


No. 

Name, 

Occupation. 

Amount. 

Fined  for 

{Specimen  continued. 


58 


LABOUR. 


WAGES   ADVICE.— Specimen  No.  \2.—{co/iti>iim{). 
Allowances  and  Primiums. 


No. 

Name. 

Occupation. 

Amount. 

Premium  allowed  for 

Remarks. 

Entered  on  Pay-sheet  by_ 


Signature 


Unless  a  special  book  recording  the  length  of  the 
employee's  service  and  of  his  or  her  varying  rates  of  pay 
and  other  details  is  kept,  the  Wages  Rate  Book  may  be 
made  to  serve  such  purpose. 

If  a  large  number  of  employees  follow  the  same  trade,  or 
if  there  is  a  recognised  scale  of  rises  on  a  period  of  employ- 
ment or  other  basis,  it  may  be  well  to  supplement 
advances  in  the  Wages  Advice  (Specimen  No.  12)  by  a 
return,  sent  into  the  counting-house  on  the  first 
day  of  each  month,  showing  the  names  and  numbers  of 
those  to  whom  it  is  proposed  during  the  month  to  grant 
increased  pay.  This  form  is  almost  identical  with  the 
Wages  Rate  Book  (Specimen  No.  13),  with  the  exception 
that  before  the  columns  showing  the  successive  advances 
there  should  be  inserted  two  columns,  the  first  showing 
the  rate  of  pay  in  force,  and  the  second  the  proposed  rate. 
The  "  remarks "  column  should  be  used  for  stating  the 
reasons  for  the  advance.  The  sole  utility  of  this  form  is 
that  through  its  use  the  principal  has  only  to  settle  the 
question  of  proposed  increases  once  a  month  instead  of 
once  a  week  ;    and  is  thereby  enabled  more  conveniently 


THE   WAGES   BOOK. 


59 


Remarks 
and  Date  of 

leaving 
Serric  e. 

V 

u 

B 
H 

> 

< 

8 

a 

> 

Pi 

u 

a 

> 

< 

5 

a 

> 

V 

as 

Q 

o 
u 

a 
n 

> 

< 

a 

Q 

u 

a 

? 

•a 

-t    ,5  c 

c 
2 

Z 

d 

to  make  inquiries  as  to  the  char- 
acter and  capacity  of  any  employee 
who  is  recommended  for  an  in- 
crease of  pay. 

In  order  to  have  a  further  check 
on  the  engagement  of  additional 
employees,  it  is  often  arranged  that 
the  names  of  any  men  who  have 
been  taken  on  and  whose  engage- 
ment increases  the  number  of 
hands  in  a  particular  trade,  shall 
be  entered  in  the  Wages  Book  in 
a  distinctively  coloured  ink,  until 
the  employer  has  seen,  sanctioned, 
and  initialled  the  entry  on  the 
Wages  Advice  recording  the  en- 
gagement. 

It  will  be  seen  from  the  fore- 
going that  the  compilation  of 
the  Wages  Book  is  not 

Compilation  ,.^^       .  ^,  , 

of  Wages  a  dimcult  matter,  and 
that,  if  ordinary  care 
and  attention  are  given  to  it,  a 
clerical  mistake  should  not  occur ; 
whilst  the  number  of  persons 
through  whose  hands  the  returns 
pass,  each  acting  as  a  check  on 
the  others,  should  prevent  pecu- 
lation and  fraud.  The  Wages 
Records  being  kept  in  detail  mini- 
mises the  number  of  questions 
which  may  arise  in  connection 
with  the  return  which  the  em- 
ployer has  now  to  make  of  those 


6o 


LABOUR. 


•SijJEiua-g 

1 

oi  lEJox 

1 
1 

1 

•SQOl} 

onpaQ 

-1 

Stoppages. 
[These  coluiniis   may    be 
used  for  the  stoppages  on 
account  of  Savings  Bank, 
Superannuation          Fund, 
Medical  Attendance,  Fuel, 
Healtli,  Unemploynicm  .i^c. 

■ssou-ei-Eg 

m^a 

jfjoMajst^ 

•sanij 

1 

•FloX 

1 

1 

•s9owe 

-MOJIY  JO 

sainiiu9jj 

•S3DUB[«g 

}!paj3 

3[JOAi30aiJ 

u 

> 

o 

< 

swiX  1                                     1 

■^nnomy 

•apEiv3inix|                                     1 

•a;^H 

•noi; 
-•Bdnboo 

•OtU-BfJ 

d 

o     ^ 


Remarks, 

including 

average 

rate  of  pay, 

&c. 

o'rt 

31  s 

Savings  Bank 
Superannua- 
tion Fund 
and  other 
Deductions. 

1 

•saouBicg 

HJOAV-330IJ 

•sanij 

1 

1 

5 
,o 

H 

saonEAiojiv 

puE 
siuninisjj 

•saDOBi^g 

■Om\fMAQ 

•jnnomy 

poN 

•sapcjx 

THE   WAGES   BOOK.  6 1 

employees  who  are  liable  to  Income  Tax,  and  their 
earnings. 

The  specimen  ruling  of  a  Wages  Book  (No.  14)  is,  we 
venture  to  think,  applicable  in  detail  to  most,  and  in 
general  principle  to  all  trades. 

This  specimen  ruling  shows  columns  for  the  entry  of  any 
stoppages  or  deductions  for  rent  of  houses,  cottages,  looms, 
frames,  troughs,  or  machinery,  where  these  belong  to  the 
employer  and  are  hired  to  the  employee,  as  also  for  fuel 
supplies,  sick  and  provident  societies,  superannuation  fund, 
deductions  under  the  National  Insurance  Acts  for  Health 
and  Unemployment  contributions  or  other  purposes.  It 
must  be  remembered  that  under  the  "Truck  Acts"  no 
non-statutory  stoppage  or  deduction  can  be  made,  unless 
there  is  a  written  agreement  or  request,  signed  by  the 
employee,  authorising  such  deduction  or  stoppage.  All 
employees,  therefore,  who  require  such  or  other  deductions 
to  be  made  should  be  requested  to  sign  a  Stoppage 
Agreement  Form,  or  Book,  should  the  latter  be  the  more 
convenient. 

An  exceedingly  useful  "  Memorandum  upon  the  Truck 
Acts,"  issued  by  the  Home  Office,  and  obtainable  from 
His  Majesty's  printers,  sets  out  the  various  purposes 
for  which  deductions  are  allowable,  provided  they  are 
reasonable.  The  whole  of  the  recommendations  of  the 
Report  of  the  Departmental  Committee  on  these  Acts 
have  not  yet  found  legislative  sanction,  but  they  show 
the  trend  of  probable  legislation. 

The  Truck  Acts,  of  course,  do  not  prevent  the  practice  of 
"subbing,"  whereby  an  employer  sometimes  permits  an 
employee  on  occasions  of  misfortune  or  special  expense  to 
receive  an  advance  of  wages  to  a  limited  extent,  such 
advance  being  v»ithout  interest  and  repaid  by  deduction 
from   the    pay-bill    each   week    until    extinguished.       In 


62  LABOUR. 

pursuance  of  Board  of  Trade  orders  under  Section  ii6 
of  the  Factory  and  Workshop  Act  of  1901,  particulars  of 
work  and  wages  have  to  be  given  to  employees  in  certain 
trades. 

If  it  is  necessary  to  have  a  permanent  record  of  the 
character  of  an  employee,  as  evidenced  by  the  fines 
imposed  or  the  premiums  granted,  such  information  can 
be  inserted  in  the  Rate  Book  by  means  of  additional 
columns,  or  special  books  arranged  with  reference  to 
trades,  as  well  as  to  individuals,  might  be  used  for  this 
purpose. 

Whether  a  separate  banking  account  for  wages  be  kept  or 
not,  necessitating  the  employer  each  week  signing  a  cheque 
_  J   for  the  exact   amount  of  the  previous  week's 

Summary  or  '■ 

wages.  wages,  so   that  the   account  may  be    kept   in 

balance,  he  may  find  it  desirable  to  have  a  summary  of  the 
Wages  Book  prepared  (Specimen  No.  15),  showing  the 
number  of  men  and  women  employed  in  the  various  trades, 
the  aggregate  of  their  wages,  their  average  rates  of  pay, 
etc.  The  Wages  Book  and  Summaries  of  Wages  should 
be  filed  for  ready  reference,  so  that,  /nfer  alia,  if  required 
for  any  purpose  under  the  Employers'  Liability  or  Work- 
men's Compensation  Acts,  or  in  connection  with  any 
insurance  fund  created  by  the  employer,  or  any  policy  of 
insurance  taken  out  by  him,  as  a  provision  against  claims 
under  those  Acts,  the  total  amount  paid  during  a  certain 
period  to  any  employee  may  be  ascertained  with  precision 
and  detail.  War  and  post-war  conditions  have  necessi- 
tated the  keeping  of  the  Wages  Records  in  considerable 
detail,  e.g.,  in  connection  with  the  employment  of  disabled 
men,  many  insurance  companies  have  entered  into  an 
undertaking  with  the  Government  to  include  the  disabled 
in  compensation  policies  on  the  same  terms  as  able-bodied 
men,  and  require  employers  to  keep  a  special  Wages  Book 


THE   WAGES   BOOK.  63 

containing  the  names  of  all  disabled  sailors,  soldiers,  and 
airmen  employed  by  them,  showing  the  wages  of  each 
separately. 

Before  passing  from  this  branch  of  our  subject  it  may 
be  well  to  mention  that  the  signatures  of  the  pay  clerk 
and  another  responsible  person  in  whose  presence  the 
wages  are  paid  are  often  considered  sufficient  evidence  of 
Hccci  ts  for  payment.  Pay  Bills,  if  used,  often  contain 
wages.  places  at   foot  for  the  signatures  of  foreman, 

the  calculators  and  checkers  of  the  amounts,  of  the  cashier, 
and  for  a  declaration  by  the  pay  clerk  that  the  wages 
shown  thereon  have  been  paid  by  him  at  the  place  and  on 
the  date  shown.  This  is  sometimes  supplemented  by  a 
further  certificate  in  general  form  by  the  Manager,  and  in 
the  cases  of  Limited  Companies  by  the  Secretary  also. 
In  some  large  undertakings  it  is  not  unusual  to  ask  the 
Auditor  to  arrange  occasional  surprise  visits  to  the  pay 
tables  whilst  pays  are  in  progress.  Even  in  large  establish- 
ments what  is  in  reality  a  receipt  for  the  wages  paid  may 
be  obtained  from  each  emplo}'ee  by  a  process  which 
entails  but  little  trouble.  The  time  or  pay  clerk  (as  may 
be  considered  the  more  expedient)  writes  out  on  a  slip  of 
paper,  ruled  and  printed  for  the  purpose,  the  date,  the 
employee's  number,  and  the  amount  receivable.  These 
forms  can  be  distributed  by  the  various  foremen  to  their 
subordinates  prior  to  the  pay.  Each  employee  presenting 
himself  at  the  pay  table  hands  in  this  "  Pay-slip  "  to  the 
pay  clerk.  These  receipts  can  be  compared  with  the 
Wages  Book. 

If  instead  of  a  Wages  Book  pay  sheets,  rolls,  or  bills 
are  used,  the  receipts  can  be  obtained  on  the  original 
documents  by  distributing  them  in  the  different  shops, 
but  this  would  involve  considerable  labour  as  compared 
with   the  procedure  first  described.     It   is   considered  by 


64  LABOUR. 

some  that  each  receipt  for  wages  above  £2  should  bear  a 
receipt  stamp.  Practice  in  this  respect  varies  considerably. 
In  some  cases  receipts  for  amounts  over  £2  are  not  taken 
at  all,  in  other  cases  receipts  from  all  receiving  more  than 
that  sum  are  taken  on  one  sheet,  and  one  receipt  stamp 
used  for  the  whole. 

As  previously  pointed  out,  in  some  undertakings  advan- 
tage arises  from,  and  clerical  labour  is  saved  by,  the  wages 
being  tabulated  in  four-weekly,  instead  of  monthly  periods, 
and  the  same  principle  is  applied  to  other  branches  of 
expenditure.  In  such  cases,  as  the  thirteen  four-weekly 
periods  would  not  coincide  with  the  calendar  year,  some 
adjustment  would  be  necessary  as  regards  broken  periods 
at  the  beginning  and  end  of  the  year. 

In  all  cases  where  men  do  not  present  themselves  at 
Unclaimed  the  pay  table  in  ordinary  course  the  pay  clerk 
Wages  Book,  ghould  make  an  entry  in  a  book  specially  pro- 
vided for  that  purpose,  called  Unclaimed  or  Unpaid  Wages 
Book,  showing  the  man's  name,  the  date,  and  the  amount 
of  his  pay  (Specimen  No.  16).  The  pay  clerk  should  hand 
over  wages  unpaid  to  the  cashier  as  soon  as  possible  after 
the  close  of  the  pay,  and  the  cashier  should  pay  the 
amounts  he  has  received  on  account  of  unpaid  wages  into 
the  bank  at  regular  periods. 

A  signature  should  be  obtained  in  this  book  for  the 
money  of  each  employee  who  obtains  his  or  her  wages 
in  any  way  other  than  at  the  pay  table  on  the  ordinary 
pay  day. 

By  means  of  this  book  the  principal  can  also  see  at 
once  what  wages  have  not  been  claimed,  and  can  give 
instructions  as  to  the  disposal  of  such  amounts  as  have 
been  so  long  outstanding  as  to  render  their  being  claimed 
improbable.  In  many  cases  employees  are  advised  of  any 
amounts  due  to  them  which  they  have  not  claimed. 


THE   METHOD   OF   PAYING   WAGES. 


65 


Where  any  considerable  number  of  employees  are  unable, 

owing  to  their  hours  of  work,  to  be  at  the  pay  table  at  the 

appointed    time,    there    may  be   two   or   more 

Payment  of         ^^  •      ,  ,        ,  i  i 

wages  to        pays  at   suitable    hours,  or    the    employees    so 
absent    may   empower    one    of    their    fellow- 
workers    to    receive    wages    on    their    behalf    (Specimen 
No.  17). 


UNCLAIMED 

WAGES   BOOK. 

—Specimen  No. 

16. 

No. 

Name. 

Trade. 

Amount. 

For  Week 
Ending. 

Date 
Paid. 

Received 
by 

Instructions 
as  to  Disposal. 

Payment  of 
wages  to 
employees 
outside 
factory. 


In  cases  in  which  employees  are  engaged  permanently  or 
temporarily  outside  the  factory,  a  receipt  for 
the  wages  remitted  them  may  with  equal  ease 
be  obtained  by  means  of  a  form  ruled  and 
printed  in  copyable  ink  (Specimen  No.  18). 
.  The  amount  of  expenses  to  be  entered  in  the  7th  column 
of  Specimen  No.  18  against  the  name  of  the  employee 
are  obtained  from  the  Out-workers'  Travelling  and  other 
expenses  sheets,  which  are  forwarded  to  the  office  by 
the  official  in  charge  of  the  out-works  operations,  by 
whom  they  should  be  certified.  Each  item  of  expense, 
such  as  railway  fares,  lodging  money,  or  allowance  for 
daily  maintenance,  "walking  time,"  etc.,  should  be  separ- 
ately shown. 

As  regards  the  method  of  paying  wages,  we  may  point 
out  that   in    large   establishments,   prior   to   drawing   the 

F 


66 


LABOUR. 


PAY  WAGES  NOTE Specimen  No.  17. 


19 


To  Vie  Cashier. 

Please    pay  the  bearer,      *      *      ♦      *,      my 
wages,  amounting  to  £  ,  for  the  week  ending 

19     . 

Name ___^ 

Occupation 

No 


The  Person  receiving  the  amount  above  named  is  respousible  for 
delivering  the  money  to  the  person  to  whom  it  is  due. 


WAGES  REMITTANCE  FORM. -Specimen  No.  18. 


-19 


Dear  Sir, 

We  enclose  you  herewith amount- 
ing to  £ in  payment  of  wages  and  expenses 


during  the. 


.ending. 


19      as  per  details 


below.  Please  obtain  the  receipts  on  this  form  and  return  to 


Nos.  of  Notes- 


Postal  Orders 


No. 

Time. 

Wages. 

Overtime. 

Expenses. 

Deduction  on 
account  of 

Superannua- 
tion Fund, 
Sec,  as  per 
advice. 

Total 
amount 
received. 

1  Received  in 
payment  as 
j  per  amount 
opposite  my 
name. 

THE   METHOD   OF   PAYING   WAGES. 


ey 


amount  from  the  bank,  it  is  almost  obligatory  that  the  totals 

of  each  page  of  the  Wages  Book  should  be  analysed  so 

that   such    proportions    of    silver    and    copper 
Method  of  1  1       •        1  .,1  ,  . 

paying  may  be  obtamed  as  will  prevent  the  necessity 

for   further   change.     This    is  done  by  means 

of  a  cash  sheet  (Specimen  No.  19),  which  also  serves  as  a 

check  upon  the  addition  of  each  page  in  the  Wages  Book, 

and    by  assigning  to  each   page  of  that  book  the  exact 

proportion  of  cash  required  to  pay  all  the  wages  entered 

on  that  page,  is  further  useful   in   localising  mistakes  in 

the  process  of  counting  out  the  money  to  be  paid  to  each 

CASH  SHEET.— Specimen  No.  19. 


No.  of  Page. 

Notes. 

Sovereigns. 

Half- 
sovereigns. 

Silver. 

Copper. 

employee,  for  if  the  sovereigns  and  half  sovereigns,  or  as  at 
present  Treasury  Notes  for  20s.  and  los.,  are  piled  or  placed 
in  heaps  of  ten  or  twenty,  and  on  the  Wages  Sheet  a 
mark  in  ink  or  in  pencil  is  placed  where  the  respective 
heap  should  end,  any  mistake  soon  becomes  apparent,  and 
can  be  rectified  by  going  over  the  counts  to  the  last 
stopping  place.  The  process  of  distributing  wages  is  often 
by  means  of  small  tin  boxes  bearing  the  numbers  by  which 
the  workpeople  are  known  for  time-taking  and  recording 
purposes,  allocated  under  the  systems  described  on  page 
34.  In  some  cases  the  amount  is  placed  in  envelopes  on 
which    in    printed    spaces  the   employee's   name,  number, 


68 


LABOUR. 


and  the  make-up  and  amount  of  his  wages  are  entered. 
In  some  cases  envelopes  either  wholly  or  partially  trans- 
parent are  used,  so  that  the  contents  of  the  envelope  may 
be  seen  and  counted,  but  some  doubts  have  been  expressed 
as  to  whether  this  method  can  usefully  be  employed  where 
a  large  number  of  employees  are  engaged. 

MONEY  TRAY.— Specimen  No.  20. 


2 

4 

5 

6 

7 

8 

9 

10 

II 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

30 

31 

32 

33 

34 

35 

36 

37 

38 

39 

40 

41 

42 

43 

44 

45 

46 

47 

48 

49 

50 

SI 

61 

52 

53 

54 

55 

56 

57 

58 

59 

60 

62 

63 

64 

6S 

66 

67 

68 

69 

70 

71 

72 

73 

74 

75 

76 

77 

78 

79 

80 

81 

82 

83 

84 

85 

86 

87 

88 

89 

90 

91 

92 

93 

94 

95 

96 

97 

98 

99 

100 

If  tin  boxes  are  used  they  are  placed  in  trays  constructed 
Money  ^^  ^o^*^  ^oo  each,  and  arranged  in  ten  squares 

trays.  (Specimen  No.  20). 

The  employees  are  called  to  the  pay  table  by  their 
numbers  and  in  consecutive  order,  the  duties  of  pay  clerk 
being  discharged  by  the  cashier,  or  some  oflficial  who  has  not 
been  engaged  in  the  process  of  counting  the  money,  or  in 
the  compilation  or  checking  of  the  Wages  Book,    The  pay 


THE   METHOD   OF   PAYING   WAGES. 


69 


0 

g 

p. 

s- 

0 

1 

ri 

en- 

z  « 

[d  a 

^S 

^^ 

1 

9 

"o 
a 

,2 
c 
.8 

1 

0 

1 

0 

Zi 

u 

•H 
0 

clerk  hands  to  each  employee 
his  or  her  particular  tin  or  enve- 
lope against  the  presentation 
of  the  receipt  form  (explained 
on  page  Ct,).  If,  owing  to  the 
large  number  of  hands,  the 
pay  would  otherwise  take  up 
much  time,  it  may  be  found 
expedient  to  have  two  or  more 
pay  tables  and  pay  clerks,  or 
there  may  be  variation,  one  set 
of  workpeople  being  paid  first 
one  week,  second  another  week, 
or  payment  may  be  made  from 
shop  to  shop,  and  so  forth  ;  but 
on  the  whole  it  is  advisable 
that  the  process  of  paying 
wages  should  be  completed  in 
as  few  minutes  as  possible.  It 
may  be  desirable  that  the  pay 
clerks  should  be  changed  from 
section  to  section  in  irregular 
rotation,  and  that  each  section 
should  be  paid  in  or  near  its 
own  shop  or  department.  As 
a  general  rule  payment  takes 
place  after  hours,  that  is  in  the 
employees'  time.  In  some  cases 
in  which  large  numbers  of  men 
are  employed,  officials  known 
as  identification  officers  attend 
the  pay,  which  is  made  by  a 
representative  of  the  finance 
branch,theidcntificationofficials 


70  LABOUR. 

giving  certificates  to  the  paying  officer  that  he  has  identified 
each  person  to  whom  payment  has  been  made.  In  cases  in 
which  owing  to  the  absence  of  the  employee  payment  could 
not  be  made,  the  paying  officer  leaves  with  the  identifica- 
tion officer  a  left  over  wages  note  to  be  handed  to  the 
employee  when  available,  who  would  thereafter  be  able  to 
draw  his  wages.  Insurances  against  misappropriation  by 
cashiers  and  pay  clerks  can  be  effected  with  any  of  the 
well-known  Guarantee  Societies. 

From  the  Time  Allocation  Book  (Specimen  No.  6)  the 
time  clerk  should  make  an  abstract  weekly,  fortnightly, 
„  four-weekly,  or  monthly  as   required,  showing 

stract  for        the  vanous  working  or  stock  orders  on  which 

purpose  of  ° 

cost.  time    has     been     spent.      This     summary    or 

abstract  should  show  against  the  various  orders  the  cost 
of  labour  during  that  period  in  the  respective  departments 
or  trades  (Specimen  No.  21). 

The  totals  so  compiled  should  agree  with  that  in  the 
Wages  Book  for  the  same  period.  This  abstract  of  wages 
will  form  the  basis  of  the  debit  to  the  Cost  Ledger  (see 
Chapter  IV.)  for  labour  expended  upon  the  various 
operations  carried  on. 

It  is  evident  that  the  totals  so  entered  on  the  Abstract 
of  Wages  Sheet  may  easily  be  traced  back  to  the  Time 
Allocation  Book,  and  that  any  more  detailed  information 
that  may  be  required  can  be  promptly  obtained. 

In  some  cases  it  is  desirable  to  post  these  Wages 
Abstracts  in  a  Wages  Journal  under  the  respective  Stock, 
Plant,  or  other  orders  (to  be  hereafter  described),  with  cross 
divisions  for  various  trades,  and  post  the  totals  of  these 
entries  to  the  respective  orders  in  the  Cost  Ledger, 
every  quarter  or  half  year,  whichever  may  be  considered 
the  more  serviceable.  In  such  cases  reference  for  details 
can,  when  desired,  be  made  back  from  the   Cost  Ledger 


DUTIES   OF   TIMEKEEPER.  71 

to  the  Wages  Journal  and  to  the  Wages  Abstracts,  with 
the  records  on  which  the  latter  is  based. 

The  diagram  opposite  page  72  will  serve  to 

books  and       show  the  relation  of  the  various  forms  and  books 

referred  to  in  this  chapter. 

It  remains  to  be  observed,  as  the  posting  of  the  rules  in 

conspicuous  places  in  the  works  is  not  of  itself  sufficient 

Adhesion        ^°  prove  knowledge,  that  when  a  person  who 

ru/csb"^^       has  been  engaged  presents  himself  at  a  factory 

employees,     (q^   work,   the   timekeeper   should    obtain    his 

signature  to  a  book  or  form  testifying  that  the  rules  of  the 

factory  have  been  duly  read  and  noted.     If  any  system  of 

fines  is  adopted,  the  attention  of  the  employee  should  be 

called  thereto  when  engaged,  and  if  agreed  to  by  him  a  record 

of  such  consent  should  be  made.     In  some  cases  a  book 

containing  the  rules  and  regulations  of  the  factory,  a  short 

description  of  the  time  system  in  use,  the  method  of  dealing 

with  material,  and  the  series  of  numbers  or  symbols  used 

for  Standing  Orders,  is  supplied  to  skilled  workmen  on 

their  joining  the  business.     The  timekeeper  should  also 

obtain   the  name  and  address  of  the  last  employer,  and 

fill  in  and  forward  to  the  counting-house  a  character  form 

for  transmission  to  him.     This  form,  which  would  ask  for 

information  as  to  the  proposed  employee's  character  and 

capacity,  his  rate  of  pay,  and  possibly  other  details  of  a 

Character       personal  nature,  when  returned  filled  in  should, 

book.  after    consideration,   be    filed    in    a    Character 

Book  or  on  the  Card  Index  or  other  system,  so  as  to  be 

easily  available.     The  address  of  every  employee  should  be 

taken  when  engaged,  and  should  be  entered  in 

Address  fc>    fc>       ' 

book.  an   Address   Book.     It  is  very  desirable   that 

periodically  the  whole  of  the  employees  should  be  asked  for 
their  addresses,  and  these  when  obtained  compared  with 
the  existing  entries.     In  cases  in  which  workpeople  may 


^2  LABOUR. 

be  required  on  urgent  or  pressing  work  it  is  especially 
desirable  to  know  their  correct  addresses,  and  it  may 
therefore  be  necessary  to  impose  a  fine  for  not  notifying 
change  of  address.  This  information  is  also  required  in 
connection  with  the  return  which  an  employer  has  to 
make  to  the  Assessor  of  Taxes  of  the  names  of  all  persons 
employed  by  him,  and  who  are  paid  during  the  year  an 
amount  in  excess  of  the  sum  for  the  time  being  fixed  as 
the  limit  for  total  exemption  from  Income  Tax. 

The  timekeeper  should  furthermore  keep  Registers,  in 
accordance  with  the  Factory  Acts,  of  the  children,  young 
persons,  and  women  employed  in  the  factory, 
women  and  as  Well  as  a  rccord  of  the  cleansing  and  white- 
washing, etc.,  of  the  shops  as  required  by  those 
Acts.  He  should  also  inform  some  responsible  person 
when  any  children  are  engaged,  and  should  see  that  the 
necessary  certificates  as  to  education  are  produced,  and 
that  the  certifying  surgeon  after  making  the  examination 
required  by  the  Act  duly  attests  the  Register. 

We  have  not  dealt  with  the  appropriation  of  fines  im- 
posed, or  the  deductions  on  account  of  superannuation,  sick, 
unemployment,  or  other  funds,  or  with  the  occu- 

Houses  be-  .         ,  ,  -  ,  i     i  •         ,        t 

longing  to       pation  by  employees  ot  houses  belongmg  to  the 

firms  occu-        ~  .  .  .        ,  , 

pied  by  firm,  as  these  more  correctly  appertam  to  the 

books  of  the  system  of  commercial  accounts, 
with  which  it  is  not  our  province  here  to  deal.  In  the  last 
case,  should  an  arrangement  be  made  by  which  the  work- 
people, in  consideration  of  not  paying  rent  for  the  houses 
they  occupy,  receive  less  wages  than  they  otherwise  would, 
then  the  interest  on  the  capital  invested  in  the  buildings 
forms  an  element  in  the  cost  of  production,  and  should 
be  debited  to  the  Cost  Ledger  as  a  percentage  upon 
the  wages  paid  or  in  common  with  the  indirect  expenses 
to  be  referred  to  later.     In  practice,  however,  it  is  found 


k'lTH  Wages. 


r  rv  /•- .     . 


H^. 


Diagram  I. 

THE  Relation  of  the  Books  and  Forms  used  in  connection  with 

[The  numbers,  where  shown^  correspond  to  the  spcdmen  rulings.) 


m 


c 


RENTS   RECEIVABLE.  73 

that  it  is  preferable  to  pay  full  wages,  to  collect  the  amount 
of  the  rent  from  the  workpeople  who  occupy  the  houses, 
such  amount  being  dealt  with  as  revenue,  and  to  enter 
the  particulars  of  and  amounts  received  from  individual 
tenancies,  with  records  of  any  premises  "void"  or  unlet, 
weekly  or  quarterly  on  a  Rent  Roll,  or  in  a  Rents  Receiv- 
able Book,  ruled  to  show  for  each  quarter  the  weekly  or 
other  receipts  from  each  tenant,  with  columns  for  arrears 
brought  and  carried  forward.  These  records  are  of  special 
utility  where  the  system  of  compounding  for  rates  is 
adopted. 


CHAPTER   III. 

STORES. 

One  of  the  first  points  to  be  considered  in  a  review  of 
the  accounts  of  a  manufacturing  or  trading  concern  is  the 
Purchase  of  question  of  the  purchase  of  the  materials  or 
materials,  commodities  which  are  essential  to  the  carry- 
ing on  of  the  business,  whether  the  articles  obtained  are 
to  be  used  as  plant  or  for  its  maintenance,  or  are  for  the 
purpose  of  manufacturing,  or  are  simply  to  be  retailed.  We 
aim,  therefore,  in  this  chapter,  to  show  the  wants  to  be 
provided  for  in  order  to  insure  economy  in  the  purchase 
and  consumption  of  material,  and  to  suggest  those  forms 
by  which  an  employer  may  assure  himself  that  the  raw 
materials  of  his  trade  are  being  bought  in  the  cheapest 
market,  and  economically  and  properly  used. 

The  initiative  in  the  purchase  of  materials  must  neces- 
sarily be  taken  by  those  more  directly  engaged  with  the 
Initiatory  details  of  manufacture,  such  as  the  foreman  or 
stage.  overlooker.      The    storekeeper,   having    found 

either  that  he  has  not  a  supply  of  the  required  or  similar 
material,  or  that  his  stock  is  low  and  needs  replenishing, 
enters  a  record  of  his  requirements  in  a  Stores  Requisition 
Book,  which  can  be  periodically  submitted  to  the  principal, 
whose  province  it  is  to  determine  when,  and  in  what 
quantity,  it  is  desirable  to  purchase  material. 

If  there  are  numerous  branches  the  Requisition  Book 
would  be  entered  up  in  the  counting-house,  daily  or  weekly 


STORES   REQUISITIONS.  75 

as  the  exigencies  of  the  business  require,  from  the  forms 
sent  in  by  the  heads  of  the  several  departments.  These 
stores  re-  requisitions  may  be  as  shown  in  Specimen  No. 
quisition.  22.  If  made  in  duplicate  the  copy  may,  after 
the  goods  are  ordered,  be  referred  to  the  requisitionist, 
with  any  information  as  to  the  terms  and  conditions  of 
the  order  which  it  is  necessary  for  him  to  know.  The 
Stores  Requisition  Book  should  contain  columns  for  enter- 
ing in  the  date  of  requisition,  a  description  of  the  goods, 
the  department  or  purpose  for  which  they  are  required,  and 
the  name  of  the  firm  to  whom  it  is  proposed  to  give  the 
order.  Columns  showing  the  price  at  which  the  goods  are 
to  be  supplied,  the  quantity  in  stock,  the  last  purchasing 
price,  and  the  name  of  last  supplier,  and  the  maximum  and 
minimum  stocks — as  these  may  from  time  to  time  have  to 
be  altered  according  to  circumstances — may  also  be  pro- 
vided for  the  guidance  of  the  principal.  When  the  entries 
in  the  Requisition  Book  have  been  examined  and  allowed, 
an  order  for  the  articles  would  be  issued.  The  advantage 
of  all  orders  for  the  purchase  of  goods  emanating  from  one 
centre,  instead  of  each  department  being  able  to  supply  its 
own  individual  needs,  is  that  it  permits  the  principal  of 
the  business  not  only  to  control  in  a  very  large  degree  the 
character  and  amount  of  the  consumption,  but  he,  or  the 
buyer  or  the  purchasing  department,  as  the  case  may  be, 
can  "  feel  the  market,"  either  by  obtaining  quotations  or 
otherwise,  and  can  thus  contract  far  more  favourably  for  the 
supply  of  the  goods  required  than  would  otherwise  be  the 
case.  Even  if  by  this  concentration  a  little  delay  in  obtain- 
ing supplies  is  caused,  it  need  not  lead  to  inconvenience, 
as  the  requisitions  can,  in  the  majority  of  cases,  very  well 
be  made  in  anticipation  of  the  demand  arising. 

Should  the  principal  determine  to  contract  for  the  supply 
of  certain  goods  over  a  period  of  time,  it  is  desirable  that 


76 


STORES. 


the  invitation-to-tender  forms  issued  by  him  should  be 
uniform,  and  should  state  clearly  and  concisely  the 
conditions  on  which  the  goods  will  be  purchased  and  paid 
for.  This  form  should  also  state  when  and  where  the 
patterns  or  samples  may  be  seen,  the  date  on  which  tenders 

STORES  REQUISITION.— Specimen  No.  22. 


No. 


Department. 


19 


A  supply  of  the  undermentioned  articles  is  required. 


Article. 

Purpose 

Date  of 
last  supply. 

Quantity 

last 
supplied. 

By  whom 
supplied. 

Price  of 
last  supply. 

Present  Stock 

and  Remarks 

with  Maximum 

and  Minimum 

Stocks. 

STORES  REQUISITION  BOOK— Specimen  No.  23. 


Date  of 
requisi- 
tion. 

Goods 

re- 
quired. 

Wanted 
by 

Pur- 
pose. 

To  be 

ordered 

from 

Order. 

Invoice. 

Remarks. 

Max. 
Stocks. 

Min. 
Stocks. 

No. 

Price. 

Amount. 

Date. 

1 

1 
j 

will  be  received  and  opened,  and  the  usual  notification  that 
the  proposing  purchaser  does  not  bind  himself  to  accept 
the  lowest  or  any  tender.  The  Prevention  of  Corruption 
Act  has  done  much  to  safeguard  the  rights  and  interests  of 
employers  against  malversation,  and  it  is  advisable  that  all 


STORES   REQUISITION    BOOK.  ^J 

employees  should  be  as  well  acquainted  with  its  provisions 
as  the  employer. 

It  is  desirable  that  a  Stores  Contract  Register  be  kept, 
that  particulars  of  each  contract  should  be  entered  therein, 
with  the  date  of  the  various  supplies,  so  that  the  position 
under  the  contract  may  be  rapidly  and  easily  ascertained. 

If  the  contract  or  order  is  to  supply  to  pattern  or  sample, 
the  storekeeper  should  keep  a  Pattern  or  Samples  Register, 
showing  dates  on  which  duplicates  (which  usually  bear  some 
identifying  seal  or  mark)  were  forwarded  or  handed  to  sup- 
pliers, and  a  record  of  the  place  of  deposit  of  the  originals. 

Specimen  ruling  No.  23  shows  the  headings  of  a  Stores 
Requisition  Book,  which  will  probably  suffice  in  most  cases, 
but  the  other  headings  referred  to  would  also  be  found  useful. 

The  date  and  amount  of  the  invoice  can,  of  course,  only 
be  inserted  at  the  conclusion  of  the  transaction  and  when 
the  goods  are  delivered,  but  their  entry  gives  a  useful 
record,  and  is  valuable  as  a  check. 

It  having  been  decided  to  order  the  material  requisi- 
tioned, there  should  be  made  out  from  such  requisitions 
the  order  to  the  vendors.     These  orders  should 

Order  form.  . ,-       ,  ...  i  •    i        i  i 

specify  the  conditions  on  which  the  goods  are 
ordered  as  to  delivery,  carriage  and  packing,  the  route  by 
which  they  are  to  be  sent,  the  place  and  time  at  which 
they  will  be  received,  the  mode  of  testing  quality,  the 
terms  and  date  of  payment,  including  the  cash  discount,  if 
any,  which  will  be  deducted,  and  instructions  as  to  acknow- 
ledging receipt  of  order,  sending  advice  notes,  invoices, 
and  statements  of  account.  In  some  cases  where  material 
is  ordered  specially  or  entirely  for  one  job  the  order  to 
the  suppliers  contains  the  instruction  that  the  goods 
supplied  are  to  be  marked  with  the  working  order. 

If  there  is  any  arrangement  as  to  payment  of  penalty  in 
case  of  delay  in   delivery,  or  defects  in  manufacture,  the 


78  STORES. 

clause  or  condition  of  the  order  should  state  that  it  is  as  by 
way  of  liquidated  damages.  In  this  connection  it  may  be 
pointed  out  that  it  is  desirable  that  those  concerned  with 
the  ordering,  accepting,  or  forwarding  of  material  or  finished 
products,  should  have  some  general  acquaintance  with  the 
provisions  of  the  Sale  of  Goods  Act  and  with  the  law 
relating  to  carriers. 

In  some  cases,  contracts  are  entered  into  for  supplies 
extending  over  a  period,  and  the  conditions  are  either  em- 
bodied in  correspondence,  or  preferably  in  the  clauses  of  a 
formal  contract.  These  contracts  should  be  summarised 
in  the  Stores  Contracts  Register  previously  referred  to. 
It  is  desirable  that  orders  for  deliveries  of  portions  of  these 
contract  supplies  should  be  made  on  the  ordinary  order 
forms,  any  necessary  alterations  being  made  thereon.  In 
other  respects,  this  mode  permits  of  the  same  procedure 
being  observed  with  contracts  as  with  orders. 

In  the  case  of  purchases  of  small  value  through  Petty 
Cash,  the  cashier  should  advise  the  storekeeper  monthly 
as  to  nature,  quantities,  and  values  of  goods  so  purchased, 
the  storekeeper  should  nominally  pass  an  order  for  the 
goods,  as  if  the  cashier  were  an  independent  supplier,  and 
the  debits  to  the  working  orders  would  thus  find  their  way 
into  the  books  in  the  usual  manner. 

In  some  cases  orders  to  supply  goods  may  be  contained 
in  a  letter  or  a  series  of  letters,  or  in  some  cases  of  emer- 
gency goods  may  be  ordered  orally.  In  these  instances  it 
is  desirable  for  reference  and  other  purposes,  as  well  as  for 
facilitating  dealing  with  the  invoices,  that  pro  /on; /a  orders 
should  be  sent  to  the  suppliers,  even  if  it  is  only  possible 
to  do  so  after  the  goods  have  been  delivered. 

The  order  forms  should,  for  reference,  be  numbered  con- 
secutively by  the  ordering  department,  and  subsidiary 
references,  by  initial    letters,  symbols,  or  numbers,  might 


STORES   REQUISITION    BOOK  79 

appear  as  numerators  over  the  order  number,  or  be  inter- 
woven therein,  so  that,  through  the  order  number,  the 
department  or  person  requisitioning,  with  the  number  of 
the  requisition,  can  be  clearly  traced,  and  a  great  deal  of 
inter-reference  thereby  be  saved.  The  use  of  the  back 
of  the  order  form  for  invoicing  purposes  will  be  referred 
to  when  dealing  with  the  procedure  as  to  invoices. 

It  is  sometimes  considered  that  if  the  order  forms  have 
counterfoils,  are  press-copied  or  are  manifolded  by  means 
of  carbon  sheets,  and  signed  by  a  responsible  person,  the 
necessity  for  a  Requisition  Book  is  not  very  apparent.  It 
will  be  found,  however,  in  practice  that  while  the  work 
required  to  keep  such  a  book  is  but  slight,  the  facilities  it 
affords  for  reference,  and  for  noting  the  orders  when 
executed,  present  many  advantages.  It  is  a  question  of  the 
relative  value  of  labour,  and  it  is  often  more  economical  for 
a  clerk  to  give  regularly  a  portion  of  his  time  to  certain 
work  than  for  an  employer  to  have  occasionally  to  give  a 
few  minutes.  If  it  is  thought  desirable  to  send  copies  of 
the  orders  issued  to  several  departments,  the  necessary 
number  of  copies  can  be  made  in  one  operation  by  the 
use  of  carbon  sheets. 

The  practice  of  forwarding  advice  notes  with  the  goods 
is  sometimes  objected  to  by  the  purchasers  as  convenient, 
but  unsafe,  as  tending  to  lead  the  storekeeper  to  return  the 
advice  note  to  the  office  as  correct,  without  having  made  the 
necessary  count  or  examination,  and  as  an  alternative  it 
is  suggested  that  the  storekeeper  should  be  supplied  with 
a  duplicate  cop\-  of  the  order,  but  on  which  the  quantit}' 
ordered  and  the  price  are  left  blank,  so  that  the  storekeeper 
is  bound  to  make  a  count.  If,  however,  the  Factory  and 
Cost  Books  are  properly  and  regularly  kept,  such  lapses 
on  the  part  of  the  storekeeper  would  soon  reveal  them- 
selves and  lead  to  correction.     In  some  cases  the  orders 


80  STORES. 

are  in  quintuplicate,  the  original  being  forwarded  to  the 
suppliers,  a  copy  being  sent  to  the  costs  branch,  the  store- 
keeper, the  correspondence  branch  respectively,  and  one 
remaining  with  the  buying  department. 

To  avoid  confusion  it  is  often  considered  that  all  goods 
received  should  pass  through  the  Stores  Account,  even  if 
ordered  for  some  particular  work  only,  and  not  be  charged, 
as  is  sometimes  the  case,  to  the  work  as  direct  goods. 

Different  systems  obtain  in  different  trades  of  dealing 
with  the  registration  of  invoices  for  goods  supplied.  Many 
Registration  firms  Stipulate  for  invoices  in  duplicate  or  tri- 
of  invoices,  plicate  to  be  distributed  among,  and  dealt  with 
by,  the  departments  concerned.  In  some  instances  the 
order  forms  sent  by  the  purchasers  are  printed  and  ruled 
on  the  back,  so  that  that  portion  of  the  order  form  can 
also  be  used  by  the  suppliers  for  invoicing  purposes.  This 
is  a  matter  of  considerable  convenience  to  the  purchasers, 
and  if  the  back  is  ruled  and  printed  in  copyable  ink,  the 
use  of  the  form  can  be  deprived  of  any  disadvantages  to 
the  suppliers.  In  almost  all  cases  it  is  stipulated  that  an 
advice  note  of  the  dispatch  of  the  goods  should  be  sent  to 
the  officer  in  charge  at  the  place  to  which  the  goods  are 
sent,  and  it  is  generally  desirable  that  the  supplier  should 
be  requested  to  send  a  duplicate  to  the  ordering  depart- 
ment. In  such  cases  the  officer  in  charge  may  be  requested 
to  send  to  the  head  office  daily  a  Stores  Received  Form 
ruled  to  show  the  species  of  goods,  from  whom  and  whence 
they  have  been  received,  the  purchase  order  number,  mode 
of  delivery,  carriage  charges,  number  and  class  of  packages, 
the  weight,  measurement,  number,  remarks  as  to  condition, 
location  in  store,  and  having  a  column  for  the  initials  of 
the  clerk  at  the  head  office,  who  compares  this  Stores 
Received  Form  with  the  invoice,  and  makes  on  each 
the   necessary    numerical    cross    references    to   the   other. 


REGISTRATION    OF   INVOICE. 


it 


Carbon  copies  of  this  return  can  also  usefully  be  sent 
to  the  departmental  chiefs  who  are  concerned.  Among 
the  advantages  of  this  method  may  be  mentioned  the 
retention  of  the  original  invoice  at  the  head  office,  with 
the  consequently  lessened  liability  to  loss,  or  delay,  and, 
in  cases  where  it  is  desirable,  the  easier  restriction  of  in- 
formation as  to  price  or  other  conditions  of  the  order.  A 
INVOICE  REGISTER  BOOK.— Specimen  No.  24. 


From 

whom 

received. 

"0  i 

Folio  in 
Requisi- 
tion Book. 

Amount  of 
Invoice. 

Date  sent 
to  Store- 
keepeis 

Date 

returned  by 
Storekeeper 

Date  handed 

to    Bought 

Day  Book 

clerk. 

STORES  RECEIVED  BOOK.— Specimen  No.  25. 


(0 

^8 
^1 

■a 

0) 

n 

x> 

< 

a  ^ 

No. 

Weight. 

<     0 

73  hJ^ 

0 

6> 

Amount. 

system  much  in  vogue  is  that  of  making  one  invoice  per- 
form all  functions.  When  this  plan  is  adopted  the  vendor 
of  the  goods  should  be  requested  to  send  the  invoice  direct 
to  the  counting-house,  notwithstanding  that  in  pursuance 
of  directions  the  goods  are  delivered  at  the  works  or  else- 
where accompanied  by  a  delivery  note.  Immediately  on 
receipt  of  the  invoice  it  should  be  examined  with  the  view 

G 


§2  STORES. 

of  ascertaining  whether  the  general  conditions  of  the  order 
have  been  complied  with,  and  the  price  charged  is  as  stipu- 
lated. If  the  primary  request  to  quote  the  order  number 
is  not  complied  with  it  is  desirable,  without  further  exami- 
nation, to  return  the  invoice  to  the  suppliers  forthwith,  so 
as  to  prevent  a  recurrence.  Should  the  invoice  be  found 
correct,  it  should  be  numbered  and  sent  to  the  storekeeper, 
foreman,  or  other  person  to  whom  the  goods  have  been 
delivered,  for  him  to  certify  as  to  the  correctness  or  other- 
wise of  their  quantity  and  quality ;  and  it  can  also  be 
signed  by  the  works  manager  as  to  quality  if  an  additional 
check  is  thought  necessary.  After  comparison  the  counter- 
foil or  copy  of  the  order  should  be  so  marked  or  ticked  as 
to  show  that  the  invoice  has  been  received.  It  may  be 
advisable,  if  the  number  of  invoices  is  large,  to  enter  them 
on  receipt  in  a  Register  Book  (Specimen  No.  24).  The 
procedure  is  for  the  storekeeper  to  enter  the  invoice  in  a 
stores  He-  Stores  Received  Book  (Specimen  No.  25),  and 
ceived  Book.  ^^^y.    ^^    j^-    |.|-^g    ^^y^^   q,^    which   it  has  been 

entered  in  that  Book. 

The  entries  in  the  Stores  Received  Book  in  turn  are 
posted  in  the  Stores  Ledger  to  the  Dr.  sides  of  the 
stores  accounts  to   which   they  belong.      These   two 

Leager.  books  bear  to  materials  the  same  relation  that 

the  Dr.  side  of  the  Cash  Book  and  the  Cash  Account  in 
the  Commercial  Ledger  bear  to  the  cash. 

The  accounts  in  the  Stores  Ledger  var)'  widely  in 
different  factories  or  works.  In  engineering,  building, 
and  many  other  trades,  metals  and  timbers,  under  their 
various  sub-divisions,  are  naturally  the  chief  among  a 
number  of  other  important  headings.  In  some  cases,  to 
save  the  multiplication  of  Ledger  headings,  stores  are 
classified  as  Special  or  General,  the  accounts  of  those 
falling  under  the  first  category  being  kept  individually,  and 


STORES  LEDGER. 


83 


a 


e  S 


r1 

f2 

c 

3 
0 

E 

■33!Jd 

1 

3 

•sqi 

1 

•SiO 

1 

•SJM3 

1 

•saox 

1 

•ON 

•noij 

-dU3S3Q 

■o'loj 

•aj^a 

(2 

Amount. 

•33UJ        1                                                          j 

C 
3 

c 

sq-i 

•sJ«3 

•suox 

•ON 

•aoij 
-duasaQ 

•sjsiiddns 

•oiioj 

•»'-a     1                         1 

those  falling  under  the  second 
being  posted  to  a  general 
Stores  Account,  or  various 
sectional  accounts.  Tabular 
forms  are  also  often  used  to 
lessen  or  avoid  great  detail 
in  the  Stores  Ledger.  The 
many  uses  of  this  book  will 
be  more  fully  explained  as 
we  proceed  with  our  subject, 
and  particularly  in  the  chapter 
on  Surveys.  It  will  suffice  at 
this  stage  to  mention  that  it 
is  the  duty  of  the  clerk  keep- 
ing the  Stores  Ledgers  to 
see  that  the  store  of  certain 
commodities  never  falls  below 
the  minimum  quantity  named 
by  the  principal,  or  exceeds  the 
maximum  quantityauthorised 
by  him. 

References  to  the  various 
records  in  connection  with  the 
^    ^.^.  purchase  of  mate- 

Certihca- 

tion  of  rial,  and   the  cer- 

invoices.  ._ 

tificates  as  to  the 
quality  of  the  goods  pur- 
chased and  of  the  correct- 
ness of  the  quantity  and 
price  can  be  shown  on  the 
invoice  itself  by  means  of 
india-rubber  stamps  typed 
as  shown  below  (Specimen 
No.    27),  or  by  means   of  a 


84  STORES. 

printed   slip   which   can    be    gummed    or   pasted   on    the 
invoice. 

INVOICE  ENDORSEMENT.— Specimen  No.  27. 


Invoice  Register 

No. 

Stores  Requisition  Book 

Fol. 

Stores  Received  Book 

Fol. 

Invoice  Allocation  Book 

Fol 

2nd  part  of 

Report  on  condition Storekeeper 

Approved Works  Manager 

Price  and  Amount  checked Invoice  Clerk 

Certified Accountant 

Passed  for  payment  on by 

Cheque  or  Cash  paid  on by 

Supplies  should  be  examined  or  tested  as  soon  as 
possible  after  receipt.  If  there  are  deficiencies  in 
supplies  or  defects  in  them  they  should  be  reported 
on  a  viewer's  advice  form  without  waiting  for  the  com- 
pletion of  the  other  endorsements,  so  that  the  matter 
may  at  once  be  taken  up  with  the  suppliers,  who 
might  otherwise  be  justified  in  refusing  to  accept  re- 
sponsibility. 

Upon  being  returned  to  the  counting-house  the 
Invoice  Alio-  invoiccs  are  entered  in  an  Invoice  Allocation 
cation  Book.  ^j.  gQugh^  Day-book,  from  which  the  items  are 
posted  in  the  aggregate  in  the  Commercial  Ledger  to  the 
debit  of  Stores,  and  in  detail  to  the  credit  of  the  vendors 
of  the  goods.  As  these  are  counting-house  books  we  do 
not  show  specimen  rulings. 


STOCKTAKING.  85 

It  will  be  obvious  that  by  these  means  the  debit  to  the 
General  Stores  Account  in  the  Commercial  Ledger,  on 
account  of  material  purchased,  will  agree  with  the  aggre- 
gate of  the  special  accounts  posted  from  the  Stores 
Received  Book  to  the  Stores  Ledger. 

Cases  arise  in  which  materials  or  tools  are  purchased, 
and  for  convenience  are  stored  at  the  seller's  works  or 
elsewhere,  or  are  waiting  forwarding  instructions  at  a 
carrier's  wharf  or  railway  shed.  If  the  supplier's  invoice 
is  dealt  with  prior  to  the  goods  passing  through  the 
Stores,  the  goods  represented  by  the  invoice  should 
be  debited  to  a  "Stores  at  Out-Stations  Account"  or 
"  Stores  in  Transit  Account,"  and  not  to  the  General 
Stores  Account.  In  these  accounts  stores  at  the  docks 
or  in  bonded  warehouses  may  also  be  included.  Some- 
times invoices  for  goods  are  dated  forward  so  as  to 
lengthen,  for  the  benefit  of  the  buyer,  the  period  during 
which  credit  is  given,  or  certain  scales  of  discount  are 
operative.  In  such  cases  it  is  necessary  to  see  that  the 
invoices  are  brought  into  the  books  on  the  actual  and 
not  the  paper  dates. 

Exceptionalh^  goods  may  have  to  be  purchased 
free  on  cart  or  rail  at  seller's  works,  or  at  a  forward- 
ing station  or  wharf.  In  such  cases  the  cost  of  delivery 
should  be  added  to  the  purchasing  price  of  the  goods, 
and  the  invoice  and  freight  note  treated  as  one  docu- 
ment. 

The  result  of  the  periodical  survey  of  the  stores  (or 
stocktaking)  would    under   this   system    agree 

Result  OS  ,  .  ,        ,         f^  T       1  •  , 

stock-  not  only  with  the  Stores   Ledger  in  regard  to 

the  particular  classes  of  materials,  but  should 
also  agree  collectively  with  the  Stores  Account  in  the 
Commercial  Ledger.  This  is  a  matter  of  paramount  impor- 
tance  in    securing    accuracy   in   factory  accounts,  and    in 


86  STORES. 

removing  one  of  the  principal  elements  of  uncertainty  in  a 
balance-sheet. 

So  far  we  have  only  traced  the  records  it  is  advisable 

to  make  in  connection  with  the  purchase  and   receipt  of 

materials.      We    have    now    to    consider    the 

Consump-  .  .     . 

tion  of  routme    appertammcr    to    the    withdrawal    of 

materials.  .    ,      r  r  ,  r 

material  from  store  for  the  manufacture  of 
stock,  for  the  running  or  upkeep  of  machinery  and  plant, 
or  for  any  other  purpose. 

The  initiative  in  the  expenditure  of  material  for  manu- 
facturing purposes  should  take  the  form  of  an  instruction 
from  the  principal  or  manager  of  the  business  to  the 
manager  of  the  works  to  make  for  stock  the  required 
commodities,  and  authorising  the  withdrawal  from  store, 
by  the  methods  to  be  described,  of  such  material  as  may 
be  thought  necessary  for  that  purpose.  The  instruction 
would  probably  take  a  form  such  as  that  shown  (Specimen 
No.  28),  and  might  be  with  two  or  more  counterfoils,  or,  by 
means  of  carbonised  sheets,  with  two  or  more  duplicates 
according  to  the  number  of  persons  or  departments  that 
should  be  advised  in  order  to  meet  the  needs  of  particular 
organisations.  In  some  cases  the  manufacture  may  in  part 
be  of  a  number  of  small  and  almost  similar  articles  in  large 
quantities,  and  the  material  used  can  only  be  worked  up 
advantageously  in  the  combination  of  parts  or  processes. 
In  such  a  case,  what  may  be  described  as  generic  Stock 
Orders  are  often  issued  by  the  management,  one  order 
covering  a  variety  of  similar  articles.  Standardised  and 
interchangeable  parts  manufactured  for  stock  as  replace- 
ments are  usually  dealt  with,  as  regards  registration  and 
routine,  in  the  same  way  as  Stock  Orders  for  a  complete 
article. 

Before  any  order  to  manufacture  is  given  it  is  advisable, 
as  tending  to  produce  greater  economy  in  cost  of  production. 


MANUFACTURING   ESTIMATE. 


87 


that  the  designer,  draughtsman,  or  other  person  best 
acquainted  with  its  processes  and  details,  on  a  properly 
Estimate  to  ^^^^'^  ^'"''^  headed  form,  should  estimate  the 
manSfac-  probablc  cost  that  will  be  incurred  in  wages  and 
ture.  materials  and  the  time  that  different  classes  of 

machinery  will  be  in  use  in  the  production  of  the  articles  in 

INSXRUCTION  TO  FOREMAN  OF  WORKS.— Specimen  No.  28. 


Date 

Stock  Order  No. 

To 

Date 

Stock  Order  No. 

To 

Particulars  of  Order. 

Date 

Stock  Order  No. 

To  Mr. 

Particulars  of  Order. 

Please  make  for 
Stock  to  the  above 
number  the  undermen- 
tioned articles,  and  for 

that  purpose  employ 
labour,  and  withdraw 
mateiial  from  Store  as 

per  accompanying  es- 
timate, No. 

Foreman 


Date  of  completion. 


question.  This  estimate  should  be  a  minimum  rather  than  a 
maximum  one.  In  all  large  establishments  much  ad- 
vantage is  derived  from  the  institution  of  a  planning  and 
progress  department  which  initiates  all  production  in- 
structions, and  watches  over  and  superintends  the  conduct 
of  the  productive  operations.  From  this  department 
emanates  also  from  time  to  time,  or  at  stated  periods,  a 
Progress  Report,  which  often  sets  out  as  in  a  percentage 
form  the  percentage  of  work  done  on  an  order  as  at  the 


88 


STORES. 


date  of  the  previous  report,  the  percentage  carried  out 
since,  and  the  percentage  remaining  to  be  done.  This 
department  is  also  sometimes  responsible  for  a  Weekly 
Production  Return,  on  which  the  expenditure  under  the 
headings  of  Labour,  Machinery  Use,  Material,  and  Ex- 
penses is  contrasted  with  the  output  or  production  for  the 
week  expressed  in  a  percentage  or  unit  form  in  the  case 
of  standardised  products,  whilst  non-standardised  products 
are  set  out  in  qualified  detail  or  are  grouped.     The  works 


STORES 

WARRANT.— 

Specimen  No.  29. 

No. ♦ 

No. Entered  in  Stores  Issued  Book,  fol. 

Requested  from  Store,  ♦ 

Requested  and  received  from  Storekeeper, 

P.  C.  Ledger  folios 

19 — : 

19 

."5 

).  of 

:er  to 

be 

rged. 

0 

a 

61 

•3  ♦ 

c    ♦ 

— 

o2    i 
•  Sum 

i 

a 

c 

Weight. 

V 

£     s.     d. 

1- 

< 

3 

< 

'^6   -g 

3 

Oh 

6 

cwt. 

qrs. 

lbs. 

♦ 

■ 

♦ 

♦ 

« 

« 

♦ 

♦ 

♦ 

♦ 

♦ 

♦ 

♦ 

♦ 

♦ 

♦ 

♦ 

^^^ 

manager  or  foreman  should  be  supplied  with  a  complete 
specification  of  all  material  and  parts  included  in  the 
estimate.  The  storekeeper  should  also  be  furnished  with 
the  same  particulars,  and  should  not,  without  special 
authority,  issue  more  material  for  the  order  than  is 
estimated.  There  is  always  a  tendency  for  more  time  and 
material  to  be  spent  in  manufacture  than  are  absolutely 
necessary,  and  the  probability  is  that  when  once  a  surplus 
quantity  of  material  has  been  withdrawn  from  store,  instead 
of  being  returned  undiminished,  it  is  in  great  part,  if  not 


ISSUE   OF   STORES. 


89 


entirely,  lost  in  wasteful  processes  or  in  other  ways  ;  or  the 
effective  localisation  of  cost  may  be  hindered  by  foremen 
exchanging  material  with  each  other  without  the  ex- 
change being  properly  recorded. 

The  foreman,  having  received  instructions  to  proceed 
with  the  manufacture,  should  draw  upon  the  storekeeper 
for  material  to  the  estimated  extent  by  means  of  a 
requisition,  sometimes  called  a  Stores  Issue  Note,  but 
which,  to  prevent  confusion  with  the  Stores  Issued  Book, 
and  for  technical  distinction,  may  be  called  a  Stores 
Warrant.  This  may  either  have  a  counterfoil  as  shown 
(Specimen  No.  29),  or  be  written  in  duplicate  by  means  of 
stores  carbon  sheets  ;  or  on  a  single  sheet  printed  in 

Warrant.  copyable  ink,  so  that  the  form  itself,  as  well 
as  the  entries  written  on  it,  may  be  copied  by  means  of 
a  press. 

In  some  factories,  save  in  cases  of  emergency,  the  Store 
is  open  for  distribution  for  certain  periods  at  certain  hours 
only.     In  other  factories    stores    are   issued   on    warrants 


ST 

ORE< 

3   ISSUED 

BOOK.- 

-Specimen 

No. 

30 

6  t 

Sup- 
plied to 

< 

Working 
No.  or 

Purpose 
to  be 

charged. 

c    . 

c 

3 

Weight. 

4) 

CL, 

Amount. 

-a  0 

M 

<< 

6 

cwt. 

qrs. 

lbs. 

signed  by  the  workmen,  the  foreman  countersigning  them 
at  the  Store  in  the  course  of  the  day  on  which  the  material 
is  issued.  In  some  industries,  and  in  the  case  of  some 
individual  factories,  material  is  priced  out,  not  at  the  price 
actually  paid,  but  on  the  basis  of  an  average_^cost  over 


90  STORES. 

different  periods  monthly,  quarterly,  or  half-yearly  as  the 
case  may  be ;  the  balance  of  quantities  at  various  costs 
being  brought  forward  from  time  to  time. 

The  storekeeper  should  enter  all  materials  issued  by 
him  in  compliance  with  warrants  in  the  Stores  Issued  Book 
Stores  (Specimen    No.    30),    which    in    due    course   is 

Issued  Book,  posted  in  the  Stores  Ledger  to  the  credit  of 
the  respective  accounts. 

When  the  business  is  a  large  one,  or  where  the  repeat 
warrants  for  small  quantities  or  small  parts  are  numerous, 
a  "  sub-store "  is  often  established  in  one  or  more  of  the 
shops,  in  which  sub-store  fixed  quantities  of  supplies  are  to 
be  held  at  each  weekly  or  other  period,  the  quantities 
used  during  such  period  being  drawn  by  means  of  local 
or  internal  requisitions,  which  are  transferred  to  one  of  the 
general  requisitions  at  the  end  of  the  period,  when  the 
necessary  parts  or  quantities  would  be  issued  from  the 
main  store  to  make  up  the  fixed  supply. 

Some    little    difficulty    may   be    experienced    both    by 

the  storekeeper   and    the   clerk   keeping  the  Cost   Books 

referred  to  in  a  following  chapter,  unless  some 

Numbering  .  /=  ,  .    ,  ,, 

Stores  arrangement  is  made    by  which   all   warrants 

\V^arrants 

are  numbered  consecutively.  When  they  all 
emanate  from  one  centre  they  may  be  consecutively  typed 
in  the  books  when  printed,  but  when  they  emanate  from 
foremen  of  several  departments  or  leading  hands  in 
various  shops,  it  will  be  found  advantageous  for  the 
storekeeper  to  be  provided  with  a  numbering  machine, 
with  which  to  type  number  all  warrants  as  they  reach 
him.  The  warrants  from  the  different  shops  or  depart- 
ments may  be  printed  on  differently  tinted  papers,  and 
may  bear  the  departmental  consecutive  number,  the 
storekeeper's  number  being  impressed  over,  alongside,  or 
under  it. 


ISSUE   OF   STORES.  9I 

All  labour  and  material  expended  in  manufacture  of 
goods  should  be  booked  to  the  Number  appearing  on  the 
stock  Order  Order  given  by  the  principal,  for  convenience 
'*°*'  called  the  Stock  Number,  to  distinguish  it  from 

the  Working  Number  hereafter  referred  to.  Working 
Numbers  are  those  assigned  for  recording  the  recurring 
and  general  costs  of  the  factory,  the  maintenance  and 
upkeep  of  plant,  machinery,  and  buildings,  and  any 
expenditure  other  than  that  incurred  in  manufacture  for 
stock. 

The  Stores  Warrant  when  entered  in  the  Stores  Issued 

Book  should  be  forwarded  to  the  counting-house,  where 

it  finds  its  way  into  the  Cost  Book,  and  forms 

Cost  Book.  -    ,  ^ .  .    .  , .  , 

one  of  the  constituents  ot  the  credit  to  the  stores 
account  in  the  Commercial  Ledger.  The  Stores  Warrants 
may  be  posted  direct  into  the  Cost  Ledger,  as  will  be  shown 
in  the  next  chapter,  or  it  may  in  some  cases  be  found 
desirable  to  post  them  in  a  Stores  Journal  under  the  re- 
spective Stock,  Plant,  or  other  orders,  to  be  hereafter 
described,  with  the  necessary  information  as  to  material, 
weight,  number,  rate,  and  cost  fully  entered  therein,  and 
to  post  the  totals  of  these  entries  to  the  respective  orders 
in  the  Cost  Ledger  every  quarter  or  half  year  as  may 
be  considered  the  more  serviceable.  In  such  cases 
reference  for  details  can,  when  desired,  be  made  back 
from  the  Cost  Ledger  to  the  Stores  Journal,  and  eventually 
to  the  Stores  Warrant. 

In  some  cases  where  there  are  numerous  issues  of 
the  same  class  of  material  for  the  same  Stock  or 
Working  numbers,  to  reduce  the  amount  of  clerical 
work,  the  individual  warrants  are  summarised  at  the  end 
of  each  week  or  month,  and  the  monetary  calculation 
worked  out  for  the  period  and  not  for  the  individual 
issues. 


92 


STORES. 


Before  leaving  the  subject  of  the  stores  books,  however, 
it  is  necessary  to  explain  that  materials  returned  to  vendors 
stores  Re-  ^^^  entered  in  a  Stores  Rejected  Book  (Speci- 
iectcd  Book,  jy^g^j  ]\Tq  t  j^^  which,  in  its  purpose,  is  coexten- 
sive with  the  Stores  Issued  Book. 

The  entries  in  this  book  are  based  upon  the  credit 
notes  received  from  the  vendors  for  the  goods  returned. 
The  storekeeper  should  on  returning  any  goods  to  the 
vendors  enter  the  transaction  in  the  Stores  Rejected  Book, 
but  leaving  the  spaces  for  the  number  and  date  of  credit 
note,  and  the  rate  and  value  of  the  returns  blank,  until  he 


STORES  REJECTED  BOOK.— Specimen  No.  31. 


i 

No.  of 
Credit 
Note. 

a 
3° 

Articles. 

Dimen- 
sions. 

6 

Weight. 

£ 

§   V   V 

Stores 
Ledger 
Folio. 

0 

m 

M 

h-1 

has  received  through  the  counting-house  the  credit  note 
from  the  vendors.  The  office  is  advised  of  the  rejection 
of  goods  either  by  an  entry  on  the  invoice  or  by  means 
of  a  Stores  Sent  Away  form. 

This  Stores  Sent  Away  form  may  require  registration  in 

the  counting-house  in  the  same  way  as  an  invoice,  and  the 

book  records  will  be  similar.     If  it  be  thought 

Registration     .  . 

of  credit         inadvisable  to  open  a  credit  note  register,  the 

notes.  ,  ^ .  ,    .  1    .    ,      .         ,         T 

notes  ma)'  be  registered  in  red  ink  in  the  In- 
voice Register  Book  and  the  words  "  credit  note  "  might  be 
added.  The  credit  note  may,  by  means  of  an  india-rubber 
stamp,  bear  references  corresponding  to  those  impressed 


STORES  CREDIT  NOTES. 


93 


on  the  invoices.  Specimen  ruling  No.  27  will  equally  apply 
in  this  case,  save  in  the  titles  of  the  books  referred  to, 
which  would  be  : — 

Credit  Note  Register  No. 


Stores  Rejected  Book  Fol. 

Goods  Returned  Outward  Book  Fol. 


It  will  probably  be  found  that  in  many  cases  a  reference 
to  the  Stores  Requisition  Book  can  be  dispensed  with  on 

STORES  DEBIT  NOTE.— Specimen  No.  32. 


No.                              *  No. 

Sent  into  Store, J  Dept. Entered  in  Shop  Returns  Book,  fol.— 

19       .   ♦    Sent  to  and  received  by  Storekeeper ,  19     . 

Article. 

L 

V 

M 

0 
0. 

3 

1  {Article. 

d-S 
20 

1 

1   Purpose. 

d 

Weight. 

Amount. 

w 

£      s.     d. 

the  credit  note.  If  the  rejections  are  at  all  numerous,  owing 
to  the  nature  of  the  business,  or  to  the  nature  of  the  stores 
used  in  manufacture,  it  may  perhaps  be  desirable  not  only 
for  the  storekeeper  to  keep  a  Stores  Rejected  Book,  but  to 
advise  the  office  of  defects  in  material  by  means  of  a  Stores 
Rejected  Note,  and  to  send  with  it  the  original  invoice 
duly  cancelled.  This  note  should  specify  the  reason  for 
rejection,  either  as  regards  non-compliance  with  terms  of 
the  order  or  quality  of  material.  It  is  desirable  that 
examination   of  stores    should   be   made  as  promptly  as 


94 


STORES. 


possible  after  receipt,  but  that  right  of  rejection  should  be 
reserved  with  regard  to  those  Stores  defects  in  which  can 
only  be  observed  when  they  are  worked  up  or  worked  upon. 
In  addition  to  the  process  of  receiving,  examining,  and, 
if  need  be,  rejecting  stores  supplied  by  vendors,  and  of 
issuing  material  for  manufacture,  the  storekeeper  will 
receive  from  the  foremen  or  over-lookers  material  which 
Return  to  ^as  been  drawn  out  in  excess  of  the  quantity 
lL*^p1us  required,   or    the    scrap    material    from    some 

material.        manufacturing  operation.     It  is  not  unusual  for 
material  drawn  out  of  store  in  excess  of  requirements  to 

SHOP  RETURNS  BOOK.— Specimrn  No.  33. 


Date. 

op  e 
IP 

13 

'x. 

< 

Order  No. 
or  job  for 
which 
Articles 
were  with- 
drawn. 

u 

6 

Weigh 

t. 

Amount. 

1 

6 

Si 

£     s.    d. 

remain  in  the  factory,  and  be  used  for  the  next  similar 
stock  order,  but  this  procedure  is  open  to  serious  objection, 
and  the  desirability  of  sending  the  material  back  to  the 
stores  Debit  store  with  a  Stores  Debit  Note  (Specimen 
Note.  j^Q_  ^2)  cannot  be  too  strongly  urged.    Not  only 

does  the  direct  return  of  material  to  store  prevent  waste  or 
improper  appropriation,  but  it  conduces  to  the  localisation 
of  the  cost  of  manufacture.  If  the  surplus  material  is  not 
so  treated,  the  stock  order,  in  respect  of  which  it  has  been 
withdrawn,  will  appear  at  a  higher  cost  than  it  should, 
while  the  work  upon  which  such  material  is  used  without 
warrant  will  have  the  benefit  without  being  charged.     In 


SHOP   RETURNS   BOOK.  95 

either  case  the  records  of  cost  of  production  are  fallacious, 
and  loss  may  thus  be  incurred.  In  some  cases  in  which 
rigid  adherence  to  this  rule  involves  great  inconvenience 
and  expense,  it  is  sometimes  allowed  to  transfer  material 
from  one  shop  to  another  by  means  of  a  Shop  Transfer 
Note,  and  at  regular  intervals  to  issue  corresponding  Stores 
Debit  Notes  and  Stores  Warrants.  It  has  been  suggested 
that  these  adjustments  might  be  made  and  the  number  of 
entries  reduced  and  clerical  labour  saved  by  the  issue  of 
temporary  notes,  and  the  issue  of  Stores  Warrants  post- 
poned until  the  facts  were  definitely  ascertained,  when 
Stores  Warrants  could  be  made  out  for  the  quantity  actually 
used,  which  with  the  stores  returned  would  equal  or  cancel 
the  temporary  note.  In  some  cases  this  procedure  might 
be  practicable,  but  it  is  open  to  the  objection  that  it  would 
largely  nullify  the  advantages  of  the  Stores  Ledger  as 
indicating  the  actual  quantity  of  the  different  kinds  of 
goods  in  stock,  and  it  would  probably  tend  to  delay  in  the 
compilation  of  the  Cost  accounts,  as  the  debits  to  the 
Manufacturing  Order  could  not  be  entered  whilst  any 
temporary  notes  were  outstanding.  This  procedure 
would  prevent  stocks  present  being  an  accurate  guide 
to  the  necessity  or  otherwise  of  ordering  further 
supplies. 

The  old  material,  or  "  Shop  Sweepings,"  which  cannot 
be  credited  to  any  particular  Stock  Order,  should  be  re- 
turned to  the  stores  with  a  Stores  Debit  Note  crediting  it 
to  one  or  more  of  the  series  of  numbers  or  standing  orders 
allotted  to  maintenance  of  machinery.  It  is  desirable  to 
pass  all  saleable  material  through  the  stores  in  this  manner 
whether  it  is  sold  forthwith,  or  remains  till  a  quantity  has 
accumulated,  or  prices  have  risen.  In  the  case  of  the  sale 
of  all  such  material,  it  is  usual  to  stipulate  for  payment 
when  price  is  accepted,  or  before  delivery.     Material  spoiled 


96  STORES. 

in  working,  or  defective  products  or  "  wasters,"  should  also 
be  returned  to,  or  passed  through,  the  stores  by  means  of  a 
Stores  Debit  Note,  the  working  or  other  order  number 
should  be  credited  with  the  full  cost  of  the  material  and 
the  work  done  on  it,  and  the  difference  between  such  cost 
and  the  value  of  the  product  should  be  debited  to  a  Com- 
plaint, Mistakes,  Spoilt  Work,  or  Waste  account,  which 
should  be  so  analysed  that  each  shop  or  department,  and 
each  employee  who  has  contributed  to  the  result,  may  be 
reminded  in  due  course  of  the  cost  of  carelessness.  In  some 
trades,  such  as  foundry  and  pottery,  a  certain  percentage 
of  defective  products  are  a  normal  factor  in  production. 
In  these  instances  the  same  procedure  may  be  adopted, 
and  will  tend  to  prevent  any  increase  in  the  percentage, 
and  in  some  cases  to  reduce  it,  owing  to  detailed  informa- 
tion leading  to  inquiries  as  to  the  cause  or  causes  of  the 
increase.* 


*  There  is  great  variation  in  the  mode  of  dealing  with  waste  as  an 
ftem  of  cost  in  Cotton  and  similar  mills.  Some  of  these  methods  and  the 
incidence  of  waste  in  cost  are  described  in  "Textile  Manufacturing 
Costs,"  by  Joel  Harlen,  The  Journal  of  Accountancy,  New  York,  and  in 
a  paper  on  Cotton  Mill  Accounts,  read  at  the  annual  meeting  in  1913  of 
the  National  Association  of  Cotton  Manufacturers  (Boston,  Mass.)  by  Joel 
Hunter,  C.P.A. 

An  interesting  lecture  on  Spoilage  as  "the  Fourth  Factor  in  Cost  Account- 
ing," by  Gordon  Wilson,  appeared  in  1917  in  The  Journal  0/  Accoitntaiicy, 
New  York. 

"  The  value  in  use  of  a  bell  with  a  flaw  in  it  is  very  little  ;  it  can  be  used 
only  as  old  metal,  and  therefore  its  price  is  only  that  of  the  old  metal  in  it. 
When  it  was  being  cast  the  same  trouble  and  expense  was  incurred  for  it 
as  for  other  bells  which  turned  out  sound.  Its  expenses  of  production  were 
the  same  as  those  of  sound  bells  ;  but  they  have  good  value  in  use,  and  are 
therefore  sold  at  a  high  price.  The  price  of  each  particular  bell  is  limited 
by  its  value  in  use.  What  the  law  of  Normal  Value  states  is  that  the 
price  of  cracked  bells  and  sound  bells  together  must,  in  the  long  run,  cover 
the  expense  of  making  bells."  Professor  Alfred  Marshall,  "Economics  of 
Industry." 


SHOP   RETURNS   BOOK  97 

The  Stores  Debit  Note  having  been  posted  by  the  store- 
keeper in  a  Shop  Returns  Book  (Specimen  No.  33),  is 
Shop  Re-  forwarded  to  the  counting-house,  where  it  is 
turns  Book,  (^jg^j^  ^yjj-|-j  ^g  recording  a  factor  in  the  cost,  as 
will  be  explained  in  the  following  chapter. 

The  entries  in  the  Shop  Returns  Book  are  (as  shown 
in  the  Diagram  II.)  posted  to  the  Dr.  side  of  the  Stores 
Ledger. 

There  is  another  source  from  which  a  storekeeper  may 
receive  goods,  viz.,  from  the  warehouse  of  the  firm.  These 
Transfers  cascs  arc  likely  to  be  exceptional,  and  can  be 
sfoJ^^and  more  fully  and  conveniently  dealt  with  in  the 
warehouse,  subsequent  chapter  on  Stock.  At  present  it 
suffices  to  say  that  as  between  the  warehouseman  in  charge 
of  the  manufactured  commodities  or  stock,  and  the  store- 
keeper in  charge  of  the  raw  material  of  trade  or  stores,  the 
departmental  adjustments  of  accounts  are  made  by  means 
of  a  Transfer  Book.  The  nature  of  this  book  will  be 
explained  later,  and  it  is  necessary  to  anticipate  the  subject 
at  this  stage  to  the  extent  only  of  stating  that,  so  far  as 
the  storekeeper  is  concerned,  the  items  in  the  Transfer 
Book  are  posted  in  the  Stores  Ledger  to  the  Dr.  side  of 
the  respective  accounts  in  the  same  way  as  other  receipts 
of  material. 

Sometimes  the  storekeeper  may  have  sent  into  store 
material  which  has  been  recovered  from  plant  and  build- 
ings, or  parts  of  machinery  which  is  no  longer  serviceable. 
In  these  cases  the  stores  accounts  will  be  debited  in  the 
usual  manner,  by  means  of  a  Plant  Recovered  Note.  These 
transactions  in  relation  to  the  machinery  and  capital 
account  of  the  business  will  be  dealt  with  in  the  chapters 
on  Fixed  Capital  and  Machinery  Use  (Chapters  VI. 
and  VII.). 

Diagram    II.  gives   a   complete  view  of  the  books  and 

H 


98  STORES. 

forms  mentioned  in  this  chapter,  and  their  connection  with 
each  other,  and  we  would  refer  to  the  remarks  in  the 
Introductory  Chapter  to  the  effect  that  the  books  are 
suggested  more  for  the  purpose  of  showing  what  the 
transactions  are  than  as  giving  stereotyped  forms  applicable 
to  every  case  without  modification.  It  will  be  manifest 
that,  provided  the  principles  are  not  lost  sight  of,  there  is 
every  scope  for  further  division,  or  greater  concentration, 
as  may  be  required. 

The  procedure  referred  to  in  this  chapter,  as  well  as 
other  chapters  in  this  book,  is  in  principle,  and  with  but 
slight  modification  in  practice,  applicable  to  ascertaining 
and  recording  the  cost  of  continuous  processes,  per  ton,  per 
thousand  feet,  or  other  unit  of  weight  or  measurement.  In 
some  trades  two  or  more  qualities  of  the  same  article,  or 
residual,  or  bye-products  may  be  produced  at  the  same  time. 
In  such  cases  all  items  of  cost  that  are  directly  incurred  in 
connection  with  a  particular  product  should  be  so  allocated, 
whilst  items,  like  motive  power,  of  which  the  direct  incidence 
is  not  known,  when  their  use  cannot  be  localised,  can  be 
distributed  over  the  various  products  on  a  percentage 
basis,  the  scale  on  which  such  percentage  is  based  generally 
having  the  time  taken  by  the  various  products  as  the  main 
factor. 

It  is  desirable  that,  as  far  as  can  be  done,  bye-products 
should  be  treated  as  distinct  branches  of  the  business,  so 
that  the  cost  of,  and  the  return  from,  the  prime  or  original 
product  shall  be  ascertained  with  the  maximum  accuracy 
obtainable.  The  methods  adopted  in  the  early  stages  of 
the  Gas  Industry,  of  deducting  the  revenue  derived  from 
residuals  from  the  cost  of  the  coal  used  for  the  manufacture 
of  gas,  and  thus  arriving  at  a  net  cost  of  coal  for  costing 
purposes,  has  been  adopted  by  many  industries  which  have 
residual  products,  and  is  still  largely  used.     This  method 


/^ 


I  WITH  Stores. 


(se,  and  Flatit,  being  continge?it 
I  diagram. 


J 


{T»    fn 


Diagram  II. 

Showing  the  Relation  of  the  Books  and  Forms  used  in  connbctjon  with  Stores. 

\Tlii  numbers,  7vhcre  shown,  torrtspond  to  the  specimen  rulings.) 


between   Warehouse,  Plant,  and  Store,  and  between  Store,  Warehouse,  and  Flant,  being  contingent 
and  purely  departmental  adjustments,  are  not  shown  on  this  diagram. 


o 


BYE-PRODUCTS.  99 

assumes  that  all  bye-products  are  sold  at  cost,  and  throws 
all  cost  for  a  time  upon  the  main  product.  In  cases  in 
which  it  may  not,  under  present  circumstances,  be  possible 
to  discern  the  cost  of  joint  products,  the  market  or  sale 
value  of  the  bye-products,  less  a  certain  percentage,  might  be 
taken  as  the  cost,  as  this  would  afford  some  information  as 
to  the  cost  at  which  the  manufacturer,  the  least  advan- 
tageously situated,  could  afford  to  sell  the  product. 


CHAPTER    IV. 

PRIME   COST   AND   THE  COST   LEDGER. 

In  the  two  preceding  chapters  we  have  dealt  with  the 
routine  appertaining  to  the  payment  of  wages  and  to  the 
Recapitu-  receipt  and  issue  of  material.  We  now  propose 
lation.  ^Q  indicate  the  manner  in  which    these  two  so 

far  independent  factors  may  be  united,  with  the  view  of 
obtaining  a  record  of  prime  cost,  and  by  the  inclusion 
of  other  items  of  expenditure,  as  described  in  succeeding 
chapters,  of  ascertaining  the  cost  of  production. 

As  we  shall  deal  with  the  distribution  of  commodities  in 
a  following  chapter,  we  do  not  here  refer  to  the  question  of 
stock,  except  in  so  far  as  it  has  a  bearing  upon  the  question 
of  stores  and  cost  of  production  generally.  It  is  well,  how- 
ever, at  the  outset  to  explain  that,  so  far  as  the  manufacture 
of  commodities  is  concerned,  we  regard  it  as  axiomatic  that 
all  articles,  whether  produced  in  pursuance  of  an  order 
received  from  outside  or  in  anticipation  of  future  demand, 
should  be  booked  as  if  they  were  intended  to  constitute 
part  of  the  standing  stock  in  trade. 

This  method  of  describing  as  stock  all  articles  manu- 
factured necessarily  involves  a  clear  distinction  being 
Distinction  drawn  between  material  used  in  manufacture, 
stock^and  ^^^  *^^  manufactured  article  which  is  the  pro- 
stores,  (juct  of  the  expenditure  of  labour,  machinery  and 
material,  or  in  other  words  between  stores  and  stock.  The 
utility  may  not  at   once  be  apparent   of  passing  through 


LOCALISATION   OF   COST.  lOI 

the  Stock  Books,  as  distinguished  from  the  Stores  Books, 
commodities  manufactured  to  supply  a  definite  order,  and 
which  are  not  likel)'  to  form  part  either  of  the  normal,  or 
of  the  exceptional  stock  in  hand  of  the  business,  but  it  will 
be  evident  that  there  is  a  distinct  advantage  in  treating 
all  orders  to  manufacture  in  the  same  way,  whether  they 
be  of  a  special  or  of  a  standard  nature.  Confusion  neces- 
sarily arises  if  part  of  an  order  for  articles  made  in  the 
factory  is  treated  as  if  supplied  from  stock,  and  another 
part  as  if  supplied  from  stores.  We  recommend  therefore 
that  all  material  and  parts  required  for  purposes  of  manu- 
facture should  be  withdrawn  from  store  and  charged  to 
their  proper  stock  orders.  If  the  article  has  in  reality  been 
manufactured  in  execution  of  a  customer's  order,  it  should 
be  withdrawn  from  the  warehouse,  and  credited  to  the 
stock  accounts,  by  the  process  described.  The  importance 
of  uniformity  in  the  treatment  of  the  orders  to  manufacture 
is  particularly  exemplified  when  the  cost  of  any  article 
which  has  not  previously  been  made,  or  made  only  to  a 
very  limited  extent,  is  to  be  taken  as  the  basis  of  calcula- 
tions for  more  extensive  transactions.  A  simple  illus- 
tration will  make  our  meaning  clear.  If  a  customer  orders 
a  suite  of  furniture  to  be  made,  we  maintain  that,  instead 
of  the  expense  of  executing  that  order  being  debited  to 
one  account,  the  several  pieces  making  up  the  suite  should 
be  made  to  separate  stock  orders.  In  this  way,  while  the 
cost  of  each  individual  piece  would  be  known,  the  cost  of 
the  suite  would  be  ascertainable  by  aggregating  the  costs 
of  all  the  pieces,  whereas,  if  the  whole  of  the  labour  and 
material  required  for  the  production  of  the  complete  suite 
had  been  indiscriminately  charged  to  one  account,  it  would 
be  difficult  to  determine  the  cost  of  any  one  piece,  should 
it  be  required  to  be  replaced  or  to  be  manufactured  more 


I02  PRIME   COST   AND   THE   COST   LEDGER. 

extensively.  It  is  well  to  exclude  all  probable  sources  of 
error,  and  this  is  largely  promoted  by  clearly  recognising 
the  distinction  we  have  drawn  between  materials  and 
manufactured  goods.  In  cases  in  which  processes  are 
continuous  in  time,  the  product  of  one  process  can  be 
charged  out  at  its  cost  to  the  next  process  ;  but  in  those 
cases  in  which  the  product  from  one  process  has  to  be 
kept  or  stored  before  it  is  used  as  the  raw  material  of 
another  process,  it  is  desirable  that  an  inventory  of  such 
product  should  be  kept,  preferably  in  the  department  in 
which  it  is  produced.  The  general  principles  of  Process 
Costing  are  applicable,  and  are  applied,  not  only  in 
chemical  and  similar  industries,  but  in  extensive  ramifica- 
tions in  the  case  of  metalliferous  mines  from  the  getting  of 
the  ore  to  the  shipment  of  matter  or  metals. 

It  having  been  decided  to  manufacture  certain  commo- 
dities, the  instruction  referred  to  in  the  preceding  chapter 
Initiatory  (Specimen  No.  28)  will  be  issued.  One  part  of 
manuiac-  ^^^  form  will  convey  to  the  manager  or  foreman 
*"''®-  instructions  to  manufacture  ;  the  other  is  for  the 

use  of  the  clerk  keeping  the  Cost  Ledger,  and  will  be 
taken  by  him  as  an  advice  of  what  orders  are  in  hand  and 
as  a  guide  to  the  folios  to  be  reserved  for  such  orders  in 
his  Ledger.  The  counterfoil,  to  which  the  forms  may  be 
attached  upon  the  completion  of  the  order,  will  be  retained 
by  the  principal. 

It  is  important  not  only  to  know  the  cost  of  each  indi- 
vidual article  produced,  but  equally  so  to  ascertain  the  cost 
of  any  particular  part,  or  of  any  particular  pro- 
scparatc         cess  of  manufacture.    Localisation  of  cost  should 
process.  ^^  carried  as  far  as  possible,  so  that  the  varying 

rates  of  realisable  profit  on  parts  may  be  known,  and  the 
pressure  to  minimise  cost  of  production  be  applied  in  the 
right  direction.      The   tendency  to   the   specialisation   of 


LOCALISATION   OF  COST.  103 

labour  has  grown,  and  is  growing,  with  the  extension  of 
the  factory  system  and  the  use  of  machinery,  and  the 
economy  thereby  induced  can  only  be  rendered  thoroughly 
effective  by  a  complete  analysis  of  cost.  As  a  well-known 
writer  on  this  subject  has  said,  "  One  of  the  first  advan- 
tages which  suggests  itself  as  likely  to  arise  from  a  correct 
analysis  of  the  expense  of  the  several  processes  of  any 
manufacture  is  the  indication  which  it  would  furnish  of  the 
course  in  which  improvement  should  be  directed.  If  any 
method  could  be  contrived  of  diminishing  by  one-fourth 
the  time  required  for  fixing  on  the  heads  of  pins,  the 
expense  of  making  them  would  be  reduced  about  thirteen 
per  cent. ;  whilst  a  reduction  of  one-half  the  time  employed 
in  spinning  the  coil  of  wire  out  of  which  the  heads  are 
cut,  would  scarcely  make  any  sensible  difference  in  the 
cost  of  manufacturing  the  whole  article.  It  is  therefore 
obvious  that  the  attention  would  be  much  more  advan- 
tageously directed  to  shortening  the  former  than  the  latter 
process."  * 

The  fact  that  since  this  passage  was  written  the  process 
of  manufacturing  pins  has  been  shortened  and  cheapened 
in  the  way  referred  to,  serves  to  bring  into  clear  relief  the 
truth  of  the  principles  enunciated  by  the  writer. 

A  similar  change  has  taken  place  in  the  production  and 
in  the  cost  of  matches.  In  an  article  in  Engineering \\.  was 
pointed  out  that  the  introduction  of  machine  methods  had 
decreased  the  cost  of  manufacture  to  one-eighth  the  cost 
in  1844.  In  the  machine  process  there  are  ten  operations 
against  four  by  hand,  machines  being  used  to  cut  the  wood 
into  splints,  to  place  them  in  the  dipping  frame,  to  dip 
them  in  the  sulphur  and  composition,  and  to  remove  them 
from  the  frame,  and  even  to  put  them   into  boxes.     All 

*  "On  the  Economy  of  Machinery  and  Manufactures,"  by  Charles 
Babbage.     4th  edition.     London  :  John  Murray. 


I04  PRIME   COST   AND   THE   COST   LEDGER. 

these  operations  are  clone  for  1,440,000  matches  in  less 
than  eight  hours,  and  then  the  packing  done  by  six  females 
takes  twenty-one  hours  forty-two  minutes.  Obviously,  says 
Engineering,  a  packing  machine  was  needed,  for  of  the  labour 
cost  for  making  the  matches — about  \s.  per  100,000 — 9^. 
went  for  packing  and  only  id.  for  the  actual  work  of  manu- 
facture. The  cost  of  making  the  matches  by  hand  was, 
in  1844,  about  Js.  6d.  per  100,000,  or  nearly  eight  times 
more. 

In  costing  the  various  processes  in  cotton  mills,  finer 
combs  or  qualities  at  certain  stages  of  production  require 
a  longer  time  to  produce  the  same  weight  than  do  the 
coarser  combs  or  qualities,  and  the  expenditure  after  these 
stages  has  to  be  allocated  on  a  different  basis  from  those 
applicable  to  the  preparatory  stages,  in  which  the  same 
considerations  do  not  arise. 

A  description,  from  a  politico-economical  point  of  view,  of 
the  advantages  arising  out  of  the  division  of  labour  does  not 
fall  within  the  scope  of  this  treatise.  These  advantages  have 
been  ably  expounded  by  Mr.  Babbage,  by  Professor  Alfred 
Marshall  and  Mary  Paley  Marshall,  and  other  writers. 

The  principles  applied  in  these  pages  to  recording  the 
cost  of  production  of  any  article  are  equally  applicable 
to  recording  the  cost  of  any  or  all  of  the  parts  of  that 
article.  Either  subsidiary  stock  orders  numbered  con- 
secutively may  be  passed,  or  the  stock  orders  for  parts  may 
be  denoted  by  the  number  of  the  original  stock  order  and 
a  letter  of  the  alphabet.  Upon  the  completion  of  all  the 
component  parts,  the  accounts  in  the  Cost  Ledger  of  the 
various  stock  orders  could  be  grouped,  so  as  to  constitute 
in  the  aggregate  the  cost  of  the  complete  article. 

For  the  purpose  of  booking  the  expenditure  upon  small 
parts  with  the  minimum  amount  of  labour,  a  nomenclature 
enabling    every    detail    to    be    accurately    and    concisely 


INDIRECT   EXPENSES.  IO5 

defined  by  a  symbol  is  exceedingly  desirable.     It  would, 

on  account  of  the  labour  involved,  be  an  obstacle  to  the 

attainment  of  the  object  in  view  if  the  size, 

Notncncla-  1        1      •  •   •  r 

ture  of  purpose,  and  relative  position  01  every  separate 

piece  had  to  be  expressed  in  ordinary  language. 
We  reproduce,  therefore,  a  paper  by  Mr.  Oberlin  Smith,* 
in  which  is  suggested  a  symbolic  nomenclature  of  the  kind 
required,  if  the  system  of  taking  out  cost  is  to  be  applied 
to  small  parts,  as  is  especially  desirable  where  such  parts 
are  standardised  and  interchangeable.  This  mnemonic 
system  has  been  amplified  by  Mr.  Henry  R.  Towne,  of  the 
Yale  &  Towne  Co.  of  Stamford,  Conn. 

As  all  labour  and  material  are  not  directly  spent  in  the 
manufacture  of  articles,  but  are  partly  devoted  to  the 
maintenance,  repair,  or  renewal  of  buildings,  machinery,  and 
plant,  and  to  other  objects,  it  becomes  necessary  to  record 
the  expenditure  upon  the  subsidiary  purposes, 
other  than      and   to   providc  for   its    distribution    over  the 

for  manu-  .  r      ,       •  .  •  1 

facturing        vanous  manutactunng  operations  or  orders. 
purposes.  Whilst  the  cost  of  setting  tools  and  machinery 

to  perform  certain  operations  may  be  charged  directly  to 
the  stock  order  on  which  the  expenditure  is  incurred,  labour 
or  material  spent  in  the  erection  of  additional,  or  the 
maintenance,  repair,  and  renewal  of  existing  machinery, 
cannot  be  apportioned  with  the  same  precision  to  any 
particular  stock  order,  as  the  cost  of  the  use  of  machinery 
is  the  product  of  many  variable  factors.  The  considera- 
tions which  should  determine  the  amount  to  be  debited  to 
any  stock  order  on  this  account  will  be  most  conveniently 
referred  to,  and  considered  in  connection  with  the  question 
of  the  charges  to  -be  made  for  the  use  of  machinery,  in 
Chapter  VII.  In  some  cases  the  machine  setter's  time  is 
charged    to    the    Machine    Account,   as   described   in   that 

*  See  Appendix  A. 


I06  PRIME   COST   AND   THE   COST   LEDGER. 

chapter.  In  other  cases  it  is  charged  as  a  percentage  on  the 
machine  operator's  wages.  In  some  other  cases  the  machine 
hour  rate  is  made  to  include  the  labour  of  the  machine 
operators,  whereby  little,  if  any,  direct  labour  charge  appears 
in  the  account  dealing  with  the  particular  order. 

Another  direction  of  expenditure  lies  in  the  maintenance, 
repair,  and  renewal,  extension,  or  erection  of  workshops, 
warehouses,  stores,  and  other  buildings.  All  such  expendi- 
ture maybe  recorded  under  general  or  various  sub-headings 
in  the  Cost  Ledger,  or  preferably  in  separate  Plant  and 
Buildings  Ledgers.  These  ledgers,  in  addition  to  the 
ordinary  rulings,  should,  for  aide  iiievioire  purposes,  con- 
tain records  of  the  number  of  the  building  or  the  plant, 
location,  description,  and  original  cost  and  name  of  maker. 
The   utility  of  these  separate  ledgers  will  be 

Localisation  ■'  ^  i       r     i  i 

of  tnaintcn-    morc  apparent  after  a  perusal  of  the  chapter 

ance  ex-  ^  ^  i, 

penses.  already    referred    to.      So   as    to    ensure    the 

maximum  amount  of  localisation  of  cost,  the  recurring 
items  in  the  maintenance  of  machinery  and  buildings,  and 
the  renewal  and  replacement  of  tools  may  receive  a 
distinctive  series  of  numbers  or  standing  orders,  and  thus 
the  cost  for  each  floor,  or  wing  of  a  building,  may  be 
ascertained.  For  expenditure  on  such  recurring  items,  the 
manager  of  the  works  may  receive  standing  instructions  ; 
but  expenditure  on  special  items  of  maintenance  or  on 
additions  to  fixed  capital  and  loose  plant  and  tools  should 
be  estimated  for,  and  authorised  in  the  same  way  as  the 
execution  of  Stock  Orders.  When  in  order  to  proceed 
with  a  certain  stock  order  it  is  necessary  to  make  special 
tools  to  enable  the  work  to  be  done,  it  will  be  convenient 
to  charge  all  time  and  material  spent  on  their  production 
to  a  tool  order  bearing  the  same  number  as  the  stock 
order  number  to  which  the  goods  are  to  be  made.  The 
cost  of  these  will  be  recorded  in  the  same  way  as  the  cost 


JOBBING   ORDERS.  I07 

of  other  tools,  but  the  number  to  which  they  are  made  serves 
to  identify  them,  and  as  they  have  been  made  specially,  and 
may  or  may  not  be  again  required,  their  cost  must  be  con- 
sidered in  the  determination  of  the  selling  price  of  the  articles, 
the  manufacture  of  which  necessitated  their  production. 

The  same  general  principles  are  also  applicable  for  re- 
cording the  cost  of  machinery  or  apparatus  sent  to  the 
works  for  repairs  or  alterations.  If  such  cases  are  not 
numerous  it  may  suffice  to  introduce  some  letter  or  numeral 
in  the  Stock  Order  Number,  to  show  that  the  order  is  not 
a  manufacturing,  but  a  repairing  or  jobbing  one.  In  other 
cases  it  may  be  desirable  to  start  a  series  of  what  are  often 
called  "Jobbing  Orders,"  and  to  record  the  costs  in  a 
special  Jobbing  Ledger,  which  would  be  supplementary  to 
the  Cost  Ledger.  This  latter  course  is  certainly  convenient 
where  a  "  Jobbing  Shop "  is  constituted  in  a  special  part 
of  the  works.  In  some  cases  the  principle  is  adopted  of 
charging  a  percentage  on  the  actual  cost  of  Jobbing  Work 
as  a  charge  for  the  use  of  plant  and  machinery.  As  has 
been  pointed  out  by  Mr.  A.  Cathless,  O.B.E.,  C.A.,  although 
there  is  only  one  system  of  costing  there  are  three  different 
methods  of  grouping  the  resultant  financial  statistics,  viz., 
Job  Costing  Process  (or  Continuous  Production),  Costing, 
and  Operation  Costing.  In  this  case  the  word  "  Job  "  is  used 
in  a  different  sense  from  that  in  which  it  is  used  in  the 
preceding  paragraph.  Mr.  Cathless  applies  the  term  Job 
Costing  to  cases  in  which  the  order  is  for  a  single  article, 
or  a  number  of  articles  to  be  produced  within  a  short 
period.  Process  Costing  he  applies  to  the  production  of 
articles  that  are  constantly  being  made,  whilst  Operation 
Costing  is  applied  to  a  further  analysis  of  process  costing. 

Other  channels  of  expenditure,  such  as  the  cost  of  the 
drawing  office,  and  the  wages  of  foremen,  gatemen,  time- 
keepers, and  others  who  are  engaged  in  supervision,  or  in 


I08  PRIME   COST   AND   THE   COST   LEDGER. 

the  distribution  of  stores,  in  keeping  time  records,  or  in 

any  similar  work,  may  be  recorded  either  under  a  special 

heading    for    General    Charges    in    the    Cost 

Factory  ° 

general  Ledger,  or  in  a  Factory  General  Charges  Book. 

arges.  j^^  some  cases  the  whole  of  the  expenses  of 
the  Stores  Department  are  charged  off  by  a  loading  or 
percentage  commission  being  charged  on  the  price  of  the 
stores.  It  has  also  been  suggested  that  the  discount 
obtained  on  the  purchase  of  goods  should  be  placed  against 
the  expenses  of  the  Stores  Department,  but  in  this  connec- 
tion it  should  be  remembered  that  the  benefit  of  trade  or 
scale  discounts  would  thus  not  be  accurately  recorded  in  the 
accounts.  As  will  be  explained  in  a  subsequent  paragraph, 
the  factory  general  expenses  may  be  summarised  at  any 
period  for  the  purpose  of  distributing  their  incidence  and 
a  ratio  established  between  them  and  the  total  amount  of 
the  wages  expended  on  the  various  orders  during  the  same 
period. 

We  are  now  able  to  consider  the  functions  of  the  Cost 

Ledger   in  which   the   prime   cost   of    any   manufactured 

«    ^,  ^         article  is  aggregated  and  recorded,  with  a  view 
Cost  ledger.  !=.t>     t. 

of  obtaining  the  cost  of  production.  This  book 
is  often  in  the  form  of  the  loose  leaf  or  perpetual  ledger, 
which  by  the  facility  it  gives  for  separation  of,  and  reference 
to,  accounts  without  sacrifice  of  security,  has  more  manifest 
advantages  in  the  case  of  the  Cost  Ledger  than  in  the 
case  of  the  ordinary  ledger.  In  it  are  summarised  the 
allocation  of  wages  spent  on  manufacture,  alluded  to  in 
Chapter  II.,  and  the  various  warrants  for  stores  used  in 
manufacture,  alluded  to  in  Chapter  III.  In  addition  to 
these  two  channels  of  expenditure  it  will  be  observed  that 
the  Cost  Ledger  (Specimen  No.  34)  provides  a  column  for 
machinery  charges,  arrived  at  on  the  principles  set  out  in 


BALANCING   THE   COST   LEDGER. 


109 


c 

1 

0 

S 
< 

•ajB^ 

0   . 

£ 

% 

6 

•ON  ajoN 

•SJBI 

•ajEQ 

Other 
Dis- 
burse- 
ments. 

«5 

u 

1 

V 

13 

•3JBH         1                                                  j 

0  J 

1* 

^ 

1 

6 

•OM  ••'^AV  1                                    1 

•■srz\ 

•3;t:a      1                                     1 

the  following  chapters,  and  a 
column  for  sundry  disburse- 
ments which  are  allocated  to 
the  respective  working  or 
stock  orders,  from  the  Petty 
Cash  Book  or  its  equivalent, 
or  from  any  similar  source. 
The  items  of  sundry  disburse- 
ments thus  charged  are  of 
course  debited  to  manufac- 
turing account  in  the  Com- 
mercial Ledger,  a  process 
which  is  facilitated  by  means 
of  inserting  in  the  Petty  Cash 
Book  a  column  showing  the 
accounts  to  which  the  items 
in  question  are  chargeable. 

These  records  having  been 
made,  the  clerk  keeping  the 
Cost  Ledger  will  periodically 
draw  out  the  total  of  his 
debits  for  the  given  period, 
under  the  various  heads  for 
the  several  items  of  wages, 
materials,  machinery  use,  and 
miscellaneous  disbursements. 
He  will  see  that  in  the  case 
of  wages  the  total  agrees  with 
the  amount  of  the  wages 
account  in  the  Commercial 
Ledger,  which  also  coincides 
with  the  totals  of  the  Wages 
Book  for  the  corresponding 
period.      He    will     also    see 


no 


PRIME   COST   AND   THE   COST   LEDGER. 


that  in  the  case  of  materials  his  totals  agree  with  the 
credits  to  the  stores  account  in  the  Commercial  Ledger 
for  stores  issued,  cognisance  being  taken  of  the  credits  in 
the  Cost  Book  ;  the  corresponding  debits  to  stores  repre- 
sent the  materials  drawn  out  to  a  given  number  but  not 
consumed  on  that  job,  and  therefore  returned  to  store,  as 
explained  later.     In  the  case  of  Machinery  Use,  he  will 


STOCK  DEBIT  NOTE 

.—Specimen  N 

0.  35- 

No.                                        ♦    No. 
Sent  into  warehouse        19    •  Sent  to  and  received  by  warehouseman 

:                                19 

♦  Stock  Received  Book  folio 

Article. 

ofc 
S50 

* 
No.  or  Weight.    ♦ 

1^ 

250 

d 

2; 

Weight. 

6 

Amount. 

d 

2: 

i 

o> 

3 : 

3 

£     s.     d. 

Sent  into  warehouse  by_ 


Received  into  warehouse  by_ 


see  that  his  total  agrees  with  the  total  credit  for  the  same 
period  to  Machinery  Account,  as  explained  in  Chapter  VII. 
As  regards  petty  cash,  the  totals  should  agree  with  the 
debit  through  the  commercial  books  to  sundry  disburse- 
ments on  manufacturing  account. 

Before  explaining  the  credit  side  of  the  Cost  Ledger  it 
will  be  well  to  give  a  specimen  of  the  form  called  a  Stock 
stock  Debit  I^ebit  Note  (Specimen  No.  35),  which  is  made 
Note.  Qu^-  concurrently  with  the  sending  of  commodi- 

ties into  stock. 


STOCK    RECEIVED   BOOK. 


Ill 


This  form,  which  may  have  a  counterfoil,  or  be  copied 
by  means  of  carbon  sheets,  emanates  from  the  leading  hand 
in  the  shop.  The  monetary  column  is  filled  in  by  the  prime 
cost  clerk  from  such  data  as  he  has  in  his  Ledger,  and  the 
contents  of  the  note  are  entered  by  him  on  the  credit  side 

STOCK  RECEIVED  BOOK.— Specimen  No.  36. 


6 
15 

No.  of 
Stock 
Debit 
Note. 

No.  of 
Order. 

Article. 

Dimen- 
sions. 

d 

"Weight. 

V 

£ 

Stock 

Ledger 

folio. 

& 

.0 
1-1 

s.     d. 

Stock 
Ledger 


of  that  book.  The  warehouseman  or  other  person  in 
charge  of  the  manufactured  goods  will,  in  his  turn,  make 
stock  Re-  ^^^  necessary  entry  in  the  Stock  Received  Book 
ceivcd  Book.  (Specimen  No.  36),  which  bears  the  same  re- 
lation to  stock  that  the  Stores  Received  Book,  explained  in 
Chapter  III.,  bears  to  stores. 

The  entries  in  the  Stock  Received  Book  are 
posted  in  the  Stock  Ledger  (Specimen  No.  ^y)- 

Besides  the  Stock  Debit  Note  there  are  posted  to  the 
credit  side  of  the  Cost  Ledger  the  credit  notes  (referred 
to  in  Chapter  III.)  for  surplus  or  scrap  raw  material 
returned  to  the  store. 

By  abstracting  the  credit  side  of  the  Cost  Ledger 
periodically,  it  will  be  seen  that  it  agrees  with  the 
Balancing  amounts  passed  through  the  commercial  books 
Cost  Ledger.  ^^  ^.j^g  ^jgj^j^.  ^f  ^^^^y.  account  (and  credit  of 

stock  orders  account)  for  stock  sent  into  warehouse,  and 
with  the  debit  to  the  stores  account  (also  credited  to  stock 


112 


PRIME  COST  AND   THE   COST   LEDGER. 


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orders  account)  for  surplus 
or  scrap  material  returned 
from  the  workshops.  The 
amounts  standing  to  the 
debit  of  uncompleted 
stock  orders  in  the  Cost 
Ledgers  will  represent 
the  value  of  the  goods 
in  course  of  manufacture, 
and  will  agree  with  the 
balance  on  manufacturing 
account  in  the  Commercial 
Ledger. 

It  is  evident  that  unless 

the    pricing   of  the   Stock 

Debit    Notes    for    articles 

sent    into    the 

Balances  on  , 

stock  warehouse       is 

orders.  i    /-  i  , ., 

delerred  until 
the  whole  of  the  order  is 
completed,  which  would  in- 
volve needless  inconveni- 
ence in  the  event  of  any 
of  the  articles  made  to  a 
Stock  Order  beingappropri- 
ated  to  fill  a  Sales  Order 
before  completion  of  the 
whole,  some  elementof  error 
may  enter  into  the  calcula- 
tions made  by  the  cost 
clerk  as  to  the  cost  at 
which  the  commodities  are 
being  manufactured.  This 
contingency  will  only  arise 


STOCK   ORDERS.  II3 

where  it  is  found  inexpedient  to  proceed  concurrently  with 
the  manufacture  of  all  the  articles  comprised  under  the 
Stock  Order  No.  to  which  labour  and  material  are  being 
booked.  That  is  to  say,  while  all  materials  required  for 
the  manufacture  of  a  given  number  of  articles  may  have 
been  withdrawn  from  store,  it  may  be  found  necessary  to 
complete  and  consign  to  the  warehouse  a  smaller  number 
of  the  articles  first,  instead  of  proceeding,  pari  passu,  with 
the  manufacture  of  all  But  this  difficulty  is  more  apparent 
than  real,  inasmuch  as  any  debit  or  credit  balances  which, 
upon  completion  of  an  order,  may  be  found  to  exist,  can 
be  adjusted  by  the  commodities  last  produced  to  that  order 
being  taken  into  stock  at  prices  slightly  reduced  or  in- 
creased to  the  extent  of  the  difference  ;  or  the  balance 
may,  if  preferred — and  must  necessarily  if  all  the  articles 
comprised  in  the  Stock  Order  are  disposed  of — be  at  once 
carried  to  the  debit  or  credit  of  trading  account,  or  the 
sales  account  of  any  particular  branch. 

The  total  of  the  balances  remaining  on  the  various  Stock 
Orders  will  of  course  represent  at  any  given  time  the  ex- 
penditure on  work  in  progress  at  that  date,  whether  in 
execution,  or  in  anticipation,  of  a  customer's  orders.  Further 
confirmation  of  the  accuracy  for  balance  sheet  purposes  of 
this  compilation,  may  be  obtained  by  the  works  manager 
being  required  to  certify  that  he  has  in  process  work  of  the 
value  shown  on  each  order. 


CHAPTER  V. 

INDIRECT   OR   INCIDENTAL   EXPENSES   AND   THEIR 

ALLOCATION. 

Having  shown  that  all  the  direct  channels  of  expenditure 
can  be  summarised  in  the  Cost  Ledger,  it  remains  for  us 
Allocation  to  show  how  the  incidence  of  the  shop  expenses 
generM*^  capable  of  direct  apportionment,  and  the  cost  of 
charges.  factory  superintendence,  may,  by  means  of  a 
Cost  Journal,  be  fairly  distributed  over  the  various 
manufacturing  operations. 

In  1887,  when  the  first  edition  of  this  book  appeared,  the 
direct  expenditure  in  wages  and  materials  only  was  in 
many  establishments  considered  to  constitute  the  cost  ; 
and  no  attempt  was  made  to  allocate  to  the  various  working 
or  stock  orders  any  portion  of  the  indirect  expenses  often 
referred  to  as  Expenses,  Fixed  Charges.  Oncost,  Expense 
Burden,  or  Dead  Expenses.  Under  this  system  the 
difference  between  the  sum  of  the  wages  and  materials  ex- 
pended on  the  articles  and  their  selling  price  constituted 
the  gross  profit,  which  was  carried  in  the  aggregate  to  the 
credit  of  profit  and  loss,  the  indirect  factory  expenses 
already  referred  to,  together  with  the  establishment  ex- 
penses, and  an  allowance  for  machinery  and  buildings  under 
the  general  term  depreciation,  being  particularised  on  the 
debit  side  of  that  account.      This  method  had  certainly 


GENERAL   CHARGES.  II5 

simplicity  in  its  favour,  but  an  efficient  check  upon  the  in- 
direct expenses  and  accurate  data  for  costing  purposes  can 
only  be  obtained  by  establishing  a  relation  between  the 
indirect  and  the  direct  expenses.  This  is  done  (i)  by  dis- 
tributing all  the  indirect  expenses  such  as  wages  of  foremen, 
rent  of  factory  (where  the  land  and  buildings  are  owned 
by  the  occupiers,  a  charge  for  rent  should  nevertheless 
be  brought  into  the  accounts),  fuel,  lighting,  heating,  and 
cleaning,  etc.  (but  not  the  salaries  of  clerks,  office  rent, 
stationery,  and  other  establishment  charges  to  be  referred 
to  later),  over  the  various  departments  or  shops  speci- 
fically, and  in  turn  distributing  the  departmental  or  shop 
totals  over  the  various  working  and  other  orders  as  a 
percentage,  either  upon  the  wages  expended  upon  the 
jobs  respectively,  or  upon  the  cost  of  both  wages  and 
materials.  If,  for  example,  the  aggregate  wages  expended 
in  manufacture  during  the  year  amount  to  iJ'io.ooo,  and 
the  materials  consumed  to  £6,000,  while  the  indirect 
factory  expenses  amount  to  ;^8oo,  then  if  the  latter  are 
to  be  distributed  in  proportion  to  the  wages  paid,  the 
cost  of  each  job  would  be  increased  by  8  per  cent,  of 
the  labour  expended  upon  it ;  or  if  the  indirect  ex- 
penses are  to  be  distributed  in  proportion  to  the  first 
cost  in  wages  and  materials,  each  job  would  be  increased 
by  5  per  cent,  of  the  amount  of  its  first  cost.  In  some 
cases  (2)  this  shop  "oncost"  is  distributed  by  two 
percentages,  the  one  being  based  on  the  wages  paid, 
the  other  on  the  value  of  the  material  used.  In 
many  undertakings  in  which  machinery  is  not  largely 
employed,  more  accurate  results  would  be  obtained  by 
charging  the  indirect  expenses  as  a  percentage  upon  the 
amount  of  the  direct  wages,  and  not  upon  the  material, 
for  the  prices  of  some  raw  materials  fluctuate  so  ver}- 
widely   that   the   other    method    described    would    render 


Il6  INDIRECT   OR   INCIDENTAL   EXPENSES. 

the  cost  comparisons  of  one  year  with  another  to  some 
extent  misleading-. 

In  foundries  these  indirect  expenses  are  as  a  matter  of 
practice  generally  distributed  in  proportion  to  the  weight 
of  the  castings,  and  not  on  the  wages.  In  this  class  of 
work  there  is  not  great  variety  in  the  material  used,  or 
large  variation  in  the  prices  thereof,  and  the  foregoing 
objection  is  thereby  somewhat  mitigated. 

In  referring  to  the  allocation  of  factory  expenses  in  pro- 
portion to  the  labour  expended  upon  the  articles  manufac- 
tured, we  have  taken  the  amount  of  wages  paid 
unskiUed*^      as  One  of  the  factors  in  the  equation,  but  the 
*  ^^^'  wages  paid  for  skilled  and  for  unskilled  labour 

respectively  may  vary  so  largely  as  to  make  such  an 
equation  fallacious  in  particular  cases,  though  quite  correct 
in  the  aggregate ;  whilst  the  amount  of  burden  is  in 
general  more  nearly  proportional  to  the  number  of  men 
employed  than  to  the  amount  of  the  pay  bill ;  and  that 
(3)  a  relation  based  upon  the  time*  during  which  the 
labour  is  employed,  instead  of  upon  the  amount  of  the 
wages  paid,  would  be  more  accurate.  For  instance,  un- 
skilled labour  of  a  given  amount  is  employed  during  a 
much  longer  period  than  skilled  labour  of  the  same  cost, 
and  it  does  not  appear  quite  reasonable  that  it  should 
bear  only  the  same  proportionate  charge  for  superin- 
tendence, lighting,  fuel,  and  similar  expenses,  the  amount 

*  "  The  true  measure  of  economy  must  include  a  comparison  of  the  value  of 
the  product  with  the  cost  of  its  production.  But  it  must  also  include  a  com- 
parison of  the  time  taken  to  produce  the  result.  .  .  .  The  economy  of  an 
industry  must  therefore  be  measured  as  a  time  rate.  It  is  directly  proportional 
to  the  value  of  the  product,  and  inversely  proportional  to  its  cost,  and  to  the 
time  taken  to  make  it,  and  to  realise  its  value"  (Professor  R.  H.  Smith  on  "The 
Measure  of  Industrial  'Economy  "  Economic  Journal,  March  1906).  In  this 
article  Professor  Smith  deals  with  three  ways  of  bettering  production — by  in- 
creasing rate  of  production  per  time  unit,  by  decreasing  cost  of  production  per 
time  unit,  by  decreasing  time  spent  in  making  and  realising  value  of  product. 


SKILLED   AND    UNSKILLED   LABOUR.  II7 

of  which  is  greater  or  less  according  to  the  time  the 
workmen  are  employed.  In  some  cases  this  is  met  by 
ascertaining  at  the  completion  of  each  job  the  number 
of  hours  at  individual  rates  of  pay  spent  thereon,  and 
charging  for  such  number  of  hours  an  hourly  "  oncost " 
rate,  estimated  on  a  basis  which  will  at  balancing  periods 
cover  the  cost  of  these  charges.  In  dealing,  in  the  first 
five  editions  of  this  book,  with  the  question  of  the  de- 
preciation of  plant,  we  described  in  some  detail  a  method 
(4)  of  distributing  the  incidence  of  a  charge  for  the  use 
of  plant  over  a  variety  of  objects  upon  the  time  basis 
or  machine  rate,  and  stated  that  the  method  was  equally 
applicable  to  the  allocation  of  indirect  expenses  or  Factory 
General  Charges.  We  have  pointed  out  that  a  system 
of  costing  based  on  wages  alone  is  fallacious,  as  a  man 
working  at  an  hour  rate  may  be  working  alone  or  with 
a  machine  for  which  an  hour  rate  higher  than  his  own 
is  payable.  Subsequent  writers  have  followed  up  the 
sug-crestion,  and  worked  it  out  in  considerable  detail  as 
a  proper  means  of  distributing  the  expenses  burden  over 
production  orders. 

The  charge  for  this  use  is  on  the  basis  of  a  machine 
hour  rate.  Each  machine  is  debited  with  its  direct  cost  of 
running  and  maintenance,  as  well  as  with  its  proportion 
of  factory  general  charges,  such  as  lighting,  heating,  and 
power.  The  charges  so  made  to  the  Plant  or  Machinery 
Ledger  (Chapter  VII.)  would  correspondingly  reduce  the 
amount  of  factory  general  charges  to  be  otherwise  dealt 
with,  and  would  permit  of  a  more  detailed  analysis  of  cost. 
An  accurate  allocation  of  the  cost  of  using  machinery  is 
as  important  as  an  accurate  allocation  of  the  cost  of  labour 
and  material,  and  may  often  be  the  determining  factor  in 
deciding  if  hand  labour  or  machine  power  is  the  cheaper 
instrument  of  production  for  some  particular  part  or  pro- 


Il8  INDIRECT   OR    INCIDENTAL   EXPENSES. 

cess.  The  utility  of  such  records  does  not  cease  with  the 
substitution  of  machine  power  for  hand  labour,  as  they 
show  the  comparative  costs  of  the  use  of  machines  of 
different  types  or  powers  for  the  same  or  similar  processes. 

Before  passing  from  the  question  of  the  allocation  of 
shop  "  oncost,"  it  may  be  mentioned  that  in  some,  but  a 
diminishing  number  of  cases,  employers  consider  that  suffi- 
ciently accurate  results  are  obtained  by  taking  the  average, 
rate  paid  for  direct  labour  in  each  shop  or  department,  and 
by  adding  thereto  such  a  percentage  rate  as  would,  over  a 
series  of  transactions,  equate  the  amount  charged  to  the 
"  oncost "  account. 

The  item  of  Depreciation  ma)-,  for  the  purpose  of  taking 
out  the  cost,  simply  be  included  in  the  category  of  the  indirect 
Deprecia-  expenses  of  the  factory,  and  be  distributed  over 
*'°"'  the  various  enterprises  in  the  same  way  as  those 

expenses  may  be  allocated  ;  or  it  may  be  dealt  with  separ- 
ately and  more  correctly  in  the  manner  already  alluded  to 
and  fully  described  in  the  following  chapter. 

A  large  proportion  of  the  expenses  of  the  drawing  office 
can  be  charged  to  the  various  working  orders,  the  statement 
of  the  work  done  in  the  drawing  office  and  the 
mentcx-'       time  spcut  thcrcon   sent  at  stated   periods  to 
penses.  ^^^  office  by  the  chief  draughtsman,  forming  the 

basis  of  the  charge  through  the  Cost  Journal.  The  estab- 
lishment expenses  and  interest  on  capital  other  than  that 
invested  in  plant  cannot,  however,  in  practice,  be  con- 
sidered as  forming  part  of  the  cost  of  any  particular  article. 
There  is  no  advantage  in  distributing  these  items  over  the 
various  transactions  or  articles  produced.*     They  do  not 

*  "When  investing  his  capital  in  providing  the  means  of  carrying  on  an 
undertaking,  the  business  man  looks  to  being  recouped  by  the  price  obtained 
for  its  various  products  ;  and  he  expects  to  Vjc  able,  under  normal  conditions, 
to  charge  for  each  of  them  a  sufficient  price,  that  is,  one  which  will  not  only 


ESTABLISHMENT   EXPENSES.  II9 

vary  proportionately  with  the  volume  of  business.  A  large 
increase  in  the  value  of  orders  received  would  not  necessi- 
tate a  like  augmentation  of  the  office  staff,  nor  would  a 
sudden  and  serious  falling  off  in  trade  enable  a  firm  to 
effect  an  immediate  or  proportionate  reduction  of  general 
expenditure.  The  expense  of  selling  and  distributing  or 
marketing  is  not  part  of  the  cost  of  manufacture.  The 
establishment  charges  are,  in  the  aggregate,  more  or  less 
constant,  while  the  manufacturing  costs  fluctuate  with  the 
cost  of  labour  and  the  price  of  material.  To  distribute  such 
charges  over  the  articles  manufactured  would  therefore 
have  the  effect  of  disproportionately  reducing  the  cost  of 

cover  the  special,  direct,  or  frivie  cost,  but  also  bear  its  proper  share  of  the 
general  expenses  of  the  business,  and  these  we  may  call  its  suppIcDientary  cost. 
These  two  elements  together  make  its  total  cost." — Professor  Alfred  Marshall, 
"  Elements  of  Economics  of  Industry."     Macmillan  &  Co. 

Professor  W.  J.  Ashley,  M.A.,  Dean  of  Birmingham  University,  has  kindly 
called  our  attention  to  the  point  that  in  the  fifth  edition  of  this  work  we 
seemed  specifically  to  exclude  Establishment  Expenses  and  Interest  as  items  in 
the  cost  of  production.  We  take  the  opportunity  presented  by  a  new  edition 
of  stating  our  views  on  these  points  in  somewhat  greater  detail,  and  thereby 
preventing  the  ambiguity  to  which  the  Professor  alluded.  He  quite  rightly 
points  out  that  these  charges  must  be  elements  in  the  cost  of  production  in  the 
wider  sense  in  which  we  use  that  term  in  other  parts  of  the  work,  and  that 
the  economists  also  include  them  in  that  term.  We  did  not  mean  to  convey 
that  Establishment  Expenses  and  Interest  were  not  elements  in  the  cost  of  pro- 
duction of  the  aggregate  of  the  commodities  manufactured.  What  we  desired 
to  point  out  was  that,  from  the  commercial  standpoint  of  a  manufacturer 
desirous  under  competitive  conditions  of  obtaining  business  data  on  which  1  e 
could  act  as  to  the  price  of  the  product.  Establishment  Expenses,  and  in 
some  measure  Interest,  would  not  be  regarded  as  items  in  the  cost  of  produc- 
tion of  particular  commodities  in  so  far  as  it  regulates  price.  The  reason  for 
this  view  is  set  out  in  the  text. 

Interest  on  the  capital  invested  in  machinery  is,  however,  we  think,  pro- 
perly and  usefully  chargeable  for,  and  to,  each  machine,  and  thereby  to  the  cost 
of  the  particular  articles  produced.  Unless  it  is  so  concluded,  it  is  not  possible 
to  accurately  compare  the  respective  costs  of  difi'erent  machines  or  processes. 

Karl  Marx,  not  ineptly,  described  machinery  as  congealed  labour.  A  dis- 
tinctive feature  of  such  labour  is  that  it  does  not  give  all  its  output  at  once, 
but  requires  time  for  the  utilisation  of  its  advantages.     The  element  of  cost  in 


I20  INDIRECT   OR    INCIDENTAL   EXPENSES. 

each  with  every  increase,  and  the  reverse  with  every 
diminution,  of  business.  Such  a  result  is  greatly  to  be 
deprecated  as  tending  neither  to  economy  of  manage- 
ment nor  to  accuracy  in  estimating  for  contracts.  The 
principals  of  a  business  acquainted  with  its  details,  includ- 
ing its  costs,  can  always  judge  what  percentage  of  gross 
profit  upon  cost  is  necessary  to  cover  fixed  establishment 
charges  and  interest  on  the  capital  used  in  the  business 
other  than  that  invested  in  machinery.  It  has  been 
urged  by  some  accountants  that  some  portion  of  the 
establishment  expenses  should  be  added  to  work  in  pro- 
gress, as  the  indirect  expenses  incurred  are  as  much  an 
increase  in  the  value  of  the  goods  partly  manufactured 
as  are  the  wages  and  materials  themselves ;  biit,  as 
previously  pointed  out,  establishment  expenses  do  not 
vary  in  like  manner  or  in  like  proportion   as  the  wages 

time  in  these  cases  creates  the  interest  charge,  which  must  be  included  in 
Machine  Cost,  not  only  for  costing  purposes,  but  to  enable  proper  comparison 
to  be  made  as  to  relative  cost  of  machine  and  manual  labour  for  particular 
purposes. 

In  considering  the  results  of  his  business,  a  manufacturer  recognises  that 
profit  does  not  start  until  interest  has  been  earned  on  the  capital  employed. 
Until  interest  has  been  earned  the  use  of  his  capital  in  manufacture  is  not 
economically  justified,  and  in  the  ultimate  analysis  of  cost  as  contrasted  with 
an  analysis  for  competitive  trade  purposes,  interest  necessarily  enters.  In  an 
able  article,  which  appeared  in  the  New  York  Journal  of  Accountancy  (re- 
printed in  The  Accountant  of  June  24,  1916),  Mr.  George  O.  May  gives  various 
"  Reasons"  of  a  practical  character  "for  excluding  Interest  from  Cost."  lie 
points  out  the  difference  between  loan  capital  and  invested  capital,  and,  inter 
alia,  submits  "that  it  is  better  to  leave  capital  investment  out  of  account 
altogether,  than  to  take  it  into  account  on  a  basis  that  does  not  even  represent 
the  true  cost  of  capital."  Mr.  May  further  points  out  that  if  the  charge  is  on 
the  basis  of  pure  interest,  that  "means  for  compensation  for  the  use  of  money, 
but  not  for  the  risk  to  which  it  is  subjected  .  .  .  the  risk  is  by  far  the  more 
important  element."  The  Accountant  of  June  29,  1918,  contains  a  reprint  of 
an  exceedingly  interesting  thesis  submitted  at  the  November  (191 7)  examina- 
tions of  the  American  Institute  of  Accountants  by  Edmund  C.  Gaux,  C.P.A., 
on  "  Relation  Between  Interest  and  Manufacturing  Costs." 


COST   LEDGERS.  121 

and  materials  account  in  consequence  of  some  particular 
piece  of  work  in  progress. 

Owing  to  the  diversity  of  methods  of  dealing  with  the 
matters  under  review,  it  has  not  been  thought  advisable 
Specimen  ^°  Complicate  the  Cost  Ledger  (Specimen  No. 
Cost  Ledger.  ^4)  by  the  addition  of  one  or  more  columns 
to  meet  the  requirements  of  any  particular  mode  of 
allocating  the  indirect  expenses,  especially  as  no  difficulty 
will  be  experienced  in  adapting  the  book  to  suit  any 
system  of  taking  out  the  cost  that  may  be  decided  upon, 
provided  the  methods  of  booking  the  cost  of  labour  and 
material,  which  are  described  in  the  previous  chapters,  be 
adhered  to.  In  many  cases,  however,  it  will  suffice  simply 
to  enter  the  percentages  of  indirect  factory  expenses  and 
depreciation  at  the  end  of  each  account  in  the  Cost  Ledger. 
In  the  consideration  of  this  matter  it  has  to  be  borne  in 
mind  that  in  many  cases  there  is  a  point  in  manufacture, 
or  in  some  of  the  processes  of  manufacture,  at  which  increase 
of  work  means  increased  cost  of  product  consequent 
upon  the  necessity  of  resorting  to  overtime  to  meet  a  tem- 
porary pressure,  or  to  many  other  causes,  or  owing  to  the 
need  of  augmenting  machinery  without  having  at  once 
sufficiency  of  work  for  the  new  plant.* 

To  ensure  consideration  of  the  question  of  what  econo- 
mies are  practicable   in   construction  or  manufacture,  the 

*  Many  of  these  were  well  set  out  by  Mr.  W.  K.  Hamilton,  F.C.A.,  in  a 
paper  on  "The  Cost  of  Production  in  Relation  to  an  Increasing  Output." 
They  are  also  referred  to  by  Professor  T.  N.  Carver  in  his  article,  "A  Sug- 
gestion for  a  New  Economic  Arithmetic,"  who  points  out  that  in  the  United 
States  the  new  "expert,  called  by  some  mischance  the  production  engineer,  is 
also  an  accountant,  bu-t  is  more  than  that.  He  is  really  a  consulting  econo- 
mist. He  is  an  accountant  who  knows,  to  begin  with,  the  general  economic 
principles  which  make  for  the  greatest  efficiency,  and  who  can  therefore  so 
direct  the  accounting  of  the  establishment  as  to  find  out  whether  each  and 
every  branch  is  returning  its  maximum  profit.  .  .  .  He  deals  principally  with  the 
commonplace  economic  principles  of  marginal  productivity  and  marginal  cost." 


122  INDIRECT   OR   INCIDENTAL   EXPENSES. 

heads  of  the  designing  and  manufacturing  departments 
should  be  advised  of  the  cost  of  each  order  when  it  is 
completed  in  such  detail  as  permits  of  a  comparison  being 
instituted  between  the  actual — as  referred  to  in  the  con- 
cluding paragraph  of  this  chapter — and  estimated  cost.  As 
a  matter  of  convenience  the  estimate  forms  may  include 
columns  for  the  actual  costs  to  be  inserted  when  known. 
The  employer  should  be  advised  of  the  difference  between 
actual  and  estimated  costs  in  such  detail  as  he  may  require. 
The  manufacturer  should  not  be  entirely  dependent  upon 
historical  costs  or  records  of  cost  under  conditions  that 
have  changed.  For  these  and  other  reasons,  it  is  desirable 
that  a  Comparative  Cost  Register  should  be  compiled, 
showing  the  difference  in  cost  of  making  the  same  or 
similar  articles  under  differing  conditions  of  time,  material, 
parts,  or  quantities.  This  Register  will  be  specially  service- 
able in  preparing  estimates  and  quoting  for  orders,  and 
permits  of  the  necessary  adjustments  in  quotations  conse- 
quent upon  the  increase  or  decrease  in  the  market  price 
of  material.  It  should  also  record  the  buying  or  market 
price  of  the  material  at  the  time  such  material  was  used, 
so  that  comparison  can  be  instituted  between  that  price 
and  the  price  at  which  it  was  purchased  for  and  charged 
out  of  store,  and  information  obtained  as  to  the  relative 
advantage  or  disadvantage  of  the  original  purchase.  In 
some  cases  the  Comparative  Cost  Register  is  superseded 
or  supplemented  by  the  cost  and  its  constituent  elements 
being  recorded  in  graphic  form  on  a  chart  which  shows 
comparisons  by  means  of  curves.  The  variations  shown 
from  time  to  time  in  the  cost  can  thus  be  converted  in 
terms  of  quantity,  prices,  kind  and  condition  of  material, 
machine  usage,  and  other  expenses. 

Should  the  multiplicity  of  the  manufacturing  operations, 
or  the  extent  of  the  business,  involve  departmentalisation 


DEPARTMENTAL   COST    LEDGERS.  1 23 

on  a  scale  which  renders  separate  departmental  Cost 
Ledgers  necessary  or  desirable,  the  totals  of  the  accounts 
in  those  Ledgers  might  be  transferred  to  the  Cost 
Ledger  under  the  respective  Order  Nos.,  by  means  of  a 
Departmental  Transfer  Book,  which  fulfils  the  same  func- 
tion between  the  various  manufacturing  departments  as  the 
Transfer  Book,  already  alluded  to,  performs  as  between 
Stores  and  Stock.  In  such  case  the  Cost  Ledger  would 
give  in  summarised  form  the  aggregated  cost  in  the  various 
departments  of  the  component  parts  manufactured,  whilst 
the  Departmental  Cost  Ledgers  would  give  all  such  detail 
as  might  be  required  to  elucidate  any  differences  between 
actual  and  estimated  costs  of  any  process  or  part  in  any 
department.  If  in  the  Departmental  Cost  Ledgers  the 
standing  or  establishment  charges  of  the  department  are 
apportioned  over  the  orders,  transfers  from  one  department 
to  another  of  finished  parts  or  worked  up  material  will  be 
on  the  basis  of  shop  cost  of  production.  If  it  be  thought 
desirable  that  departmental  transfers  should  be  on  a  profit 
basis,  the  procedure  with  regard  to  Stock  Orders,  as  pre- 
viously described,  is  applicable.  A  profit  basis  may  in 
some  cases  be  necessary  to  kindle  departmental  emulation, 
but  there  is  in  its  operation  a  latent  risk  of  stock  values 
being  eventually  increased  to  more  than  the  aggregate 
cost  of  production  in  the  different  departments,  and  profits 
not  yet  realised  by  the  sale  of  the  article  manufactured 
being  to  some  extent  anticipated.  This  risk  may  not, 
even  in  an  extensive  business,  be  a  large  one,  unless  the 
stocks  at  balancing  periods  show  an  increase  as  compared 
with  corresponding  periods.  In  such  cases  it  may  be  desir- 
able to  open  an  Adjustment  Account,  recording  the  differ- 
ence between  prime  cost  and  cost  of  production  in  the 
different  manufacturing  branches. 

For   some    time  past  there  have  been  cases  in   which 


124  INDIRECT   OR   INCIDENTAL   EXPENSES. 

work  has  been  undertaken  in  connection  with  the  produc- 
tion of  special  articles,  or  the  carrying  out  of  special  work 
in  which  the  two  parties  to  a  contract  have  recognised  the 
difficulty  of  fixing  in  advance  a  price,  or  the  amount  to 
be  paid,  and  the  order  has  been  accepted  on  the  basis  of 
cost,  plus  such  an  amount  as  by  way  of  percentage  or  other- 
wise as  would,  it  was  thought,  remunerate  the  manufacturer 
or  contractor.  During  the  European  War  this  form  of  con- 
tract, known  as  the  cost  plus-contract,  was  largely  adopted 
by  various  Government  Departments.  In  such  cases  the 
ascertainment  of  departmental  costs  becomes  of  special  im- 
portance, and  it  becomes  specially  necessary  to  see  that  all 
workingcostsaredivided  equitably  between  thedepartments.* 

In  the  diagrams,  as  in  the  text,  we  have  shown  how  the 
Cost  Ledger  converges  into  the  General  or  Commercial 
Ledger.  The  detailed  totals  in  the  Cost  Ledger  or  Ledgers 
can  thus  be  used  in  verification  of  the  totals  of  the  various 
generic  accounts  in  the  Commercial  Ledger,  or  vice  versa,  as 
shown  in  Diagram  No.  3.  If  it  is  thought  desirable  to  apply 
the  self-balancing  principle,  a  "Cost  Ledgers  Account,"  or  a 
Manufacturing  Account,  can  be  opened  in  the  Commercial 
or  General  Ledger,  and  a  "  General  Ledger  Account,"  or 
Works  Account,  in  the  Cost  Ledgers.  These  accounts, 
although  having  independent  origin,  would  through  the 
journal  be  found  to  balance  each  other,  and  each  set  of 
books  would  be  self-contained  and  self-balanced.  Diagram 
No.  4,  an  expansion  of  Diagram  No.  3,  shows  the  application 
of  this  principle. 

Though  it  is  essential  for  accounting  purposes,  the  record 
of  "  actual  "  cost  is,  from  the  point  of  view  of  an  industrial 
economist,  not  an  actual,  but  only  an  "  apparent "  cost. 

*  Some  interesting  data  on  this  subject  appeared  in  the  Accountant'' s 
Journal  of  New  York,  "  Overhead  Distribution  for  Cost  plus  Contract,"  see 
Accountant,  November  23,  1918.     Frank  G.  Sudman. 


Showing  the  Relation  of  t: 


Diagram  III. 
Books  and  Forms  used  i 


1*4    CONNECTION    W 

{The  mimbers.  where  shown,  correspond  to  thi  specimen  rulings.) 


Diagram  IV. 

THE  Relation  of  the  Books  and  Forms  used  in  connection  with  Prim 

WHEN  THE  Cost  and  Commercial  Ledgers  are  separately  balanced. 

(The  numbers^  where  shown^  correspond  with  the  specimen  ruling.) 


APPARENT   COST.  125 

From  this  point  of  view,  the  "  apparent "  cost  is  the  cost 
under  the  conditions  existent  at  the  time,  and  is  dependent 
upon  a  number  of  causes,  such  as  full  employment  at  the 
factory  and  condition  of  plant. 

By  some  writers  *  the  true  cost  is  only  ascertainable  by 
deducting  from  the  accountant's  "actual" — which  is  the 
industrial  economist's  "  apparent  " — cost  the  expenditure 
which  would  not  have  been  incurred  save  for  error  in 
manipulation  or  use.  As  distinguished  from  true  cost,  there 
remains  the  third  of  the  comparable  costs,  known  as 
"  standard "  cost,  which  should  represent  cost  when  pro- 
duction is  at  the  highest  stage  of  efficiency  attainable 
under  existing  conditions. 

*  In  particular,  Mr.  F.  J.  Knoepel,  C.  P.A.,  in  "  Fundamentals  of  Accounting 
for  Industrial  Waste."  Jotnual  of  Accountancy,  New  York,  Accountant, 
January  25,  1919. 


CHAPTER   VI. 

FIXED   CAPITAL   AND  DEPRECIATION. 

In  this  chapter  we  purpose  dealing  with  the  accounts 
pertaining  to  instruments  of  production  of  a  more  or  less 
Definition  of  P^*''^^"^"^  character.  These,  as  Mill  pointed 
fixedcapitai.  q^^^  ''produce  their  effect,  not  by  being  parted 
with,  but  by  being  kept ;  and  the  efficacy  of  which  is  not 
exhausted  by  a  single  use.  To  this  class  belong  buildings, 
machinery,  and  all  or  most  things  known  by  the  name  of 
implements  or  tools.  The  durability  of  some  of  these  is 
considerable,  and  their  function  as  productive  instruments 
is  prolonged  through  many  repetitions  of  the  productive 
operation.  ...  Of  fixed  capitals,  some  kinds  require  to 
be  occasionally  or  periodically  renewed.  Such  are  all 
implements  and  buildings  ;  they  require,  at  intervals,  partial 
renewal  by  means  of  repairs,  and  are  at  last  entirely  worn 
out,  and  cannot  be  of  any  further  service  as  buildings  and 
implements,  bat  fall  back  into  the  class  of  materials.  In 
other  cases  the  capital  does  not,  unless  as  a  consequence 
of  some  unus  lal  accident,  require  renewal  ;  but  there  is 
always  some  outlay  needed,  either  regularly  or  at  least 
occasionally,  to  keep  it  up."  * 

*  "  Principles  of  Political   Economy."     J.  S,  Mill.     Book  I.,   chap,  vi., 
par.  I.     Longmans,  London. 


VARYING   VIEWS   ON    DEPRECIATION.  12/ 

In  law,  a  more  restricted  definition  of  the  term  fixed 
capital  is  applied  than  is  the  case  in  economics.  Legally, 
fixed  capital  is  property  acquired  and  intended  for  reten- 
tion and  employment  with  a  view  to  profit,  as  distinguished 
from  circulating  capital,  meaning  property  acquired  or 
produced  with  a  view  to  sale  or  re-sale  at  a  profit.* 

Inasmuch  as  the  profit  or  loss  of  an  undertaking  for  any 
period  is  not  simply  the  difference  between  the  receipts  and 
Dcprecia-  expenditure  during  that  period,  nor,  save  in 
tion.  exceptional  cases,  the  current  value  of  plant  the 

amount  which  has  been  paid  for,  or  expended  upon  it,  the 
question  of  the  depreciation  of  factories  and  of  plant  must 
be  regarded  as  a  matter  of  paramount  importance  in  the 
determination  of  the  lucrativeness  or  otherwise  of  a  business, 
and  in  the  valuation  of  properties.  By  depreciation  is  meant 
decrease  in  financial  value,  whilst  deterioration  implies 
material  or  mechanical  processes.  Many  different  views 
prevail  as  to  the  best  way  of  dealinc:  with  these 

Variety  of         ^  .  ,  .  "^       ,  ,  '=' 

views  on  the  ouestious,  and  owmg  to  trades  and  processes  of 

subject.  ^  -  ..,,...  ... 

manufacture  varymg  widely  it  is  impossible  to 
lay  down  invariable  rules.  Questions  as  to  the  particular 
practice  to  be  followed  in  any  individual  case  must,  to  a 
large  extent,  be  left  to  the  judgment  of  those  most 
intimately  acquainted  with  the  conditions  of  the  business, 
for,  as  has  been  pointed  out  by  Professor  Marshall,  "almost 
every  trade  has  its  own  difficulties  and  its  own  customs 
connected  with  the  task  of  valuing  the  capital  that  has 
been  invested  in  a  business,  and  of  allowing  for  the 
depreciation  which  that  capital  has  undergone  from  wear 
and  tear,  from  the  influence  of  the  elements,  from  new 
inventions,  and  from  changes  in  the  course  of  trade.  These 
two  last  causes  may  temporarily  raise  the  value  of  some 

*  Buckley  on   "Companies"  (Qth  edition,   p.   653).     This  definition  was 
adopted  by  Alverstone,  C.J.,  in  Galloway  v.  Schill,  Seebohni,  &  Co.,  1912. 


128  FIXED   CAPITAL   AND   DEPRECIATION. 

kinds  of  fixed  capital,  at  the  same  time  that  they  are 
lowering  that  of  others.  And  people  whose  minds  are  cast 
in  different  moulds,  or  whose  interests  in  the  matter  point 
in  different  directions,  will  often  differ  widely  on  the 
question  what  part  of  the  expenditure  required  for  adapting 
buildings  and  plant  to  changing  conditions  of  trade  may 
be  regarded  as  an  investment  of  new  capital,  and  what 
ought  to  be  set  down  as  charges  incurred  to  balance 
depreciation,  and  treated  as  expenditure  deducted  from 
the  current  receipts,  before  determining  the  net  profits  or 
true  income  earned  by  the  business."  * 

Some  examination  of  the  fundamental  principles  to  be 
Exhaustive  observed  in  regard  to  charging  up  machinery 
ofslTbjc^V**"  costs  and  "writing  off"  is  obligatory  in  con- 
impossibie.     sidering  the  methods  of  ascertaining  costs. 

The  question  of  maintenance  is  very  closely  associated 

with  that  of  depreciation,  which  includes  not  only  wear 

and  tear,  but  other  constituent  causes,  such  as 

Five  factors  . 

in  the  deter-  weather  cxposure,  contributory  to  expired 
deprccia-  capital  Outlay.  There  are  five  main  factors 
which  enter  into  the  determination  of  any 
rule  for  arriving  at  the  deterioration  which  has  taken 
place :  ist.  The  cost  of  an  object,  be  it  a  building,  machine, 
or  other  asset.  This  may  be  either  the  cost  price  or,  in 
the  case  of  the  transfer  of  an  established  business,  the 
estimated  value  of  the  object.  2nd.  Its  estimated  tenure 
of  life,  regard  being  had  to  its  functions  and  the  conditions 
under  which  they  are  performed,  including  therein  volume, 
character,  and  nature  of  work,  the  material  on  which  it  is 
employed,  and  the  personal  equation  or  care  taken  by 
operators  or  attendants  in  the  care  and  management  of 
machinery,  especially  when,  owing  to  stress  of  work,  its 
operations  are  controlled  by  those  who  have  had  but  little 

*   "The  Principles  of  Economics."     Alfred  Marshall. 


VARYING   VIEWS   ON    DEPRECIATION.  1 29 

experience  of  similar  plant.  3rcl.  The  extent  and  value  of 
the  renovation  or  restoration  received  by  it  from  time  to 
time.  4th.  Its  value  in  use,  or  its  present  earning  power, 
relatively  and  comparatively,  to  other  instruments  of  pro- 
duction used  for  similar  purposes.  5th.  Its  residual  value, 
either  as  scrap  or  as  an  implement  which,  though  possibly 
applicable  to  other  uses,  is  no  longer  fit  for  its  original 
purpose.  This  residual  is  generally  lower  in  proportion  to 
original  cost,  if  the  plant  or  machine  is  specially  constructed, 
than  if  it  is  fit  for  general  use. 

In  an  interesting  lecture  on  "Works  Accounting,"  by 
Mr.  R.  N.  Barber,  A.C.A.,  delivered  before  the  Manchester 
Chartered  Accountants  Students'  Society,  after  quoting 
these  five  main  factors,  he  said,  "To  these  five  I  would 
frequently  add  a  sixth,  obsolescence,  unless  it  is  intended 
to  be  included  in  (2)  or  (4).  In  some  industries  there  are 
peculiar  forms  of  obsolescence  that  have  nothing  to  do 
with  the  machinery  itself  A  change  of  taste  or  of  fashion 
might  completely  destroy  the  demand  for  the  particular 
commodity  produced  by  a  machine,  or  a  rise  in  the  price 
of  raw  material  might  have  the  same  effect.  Such 
possibility  of  obsolescence  is  entirely  different  to  the  fear 
of  improved  methods,  etc.  (the  usual  meaning  of  the  term), 
which  would  have  the  different  effect  of  cheapening 
production.  Now  any  of  these  last  five  factors  might 
materially  alter  the  annual  cost  of  two  machines,  of  which 
the  first  factor,  the  capital  outlay,  was  the  same,  and  when 
it  is  further  remembered  that  one  machine  in  a  shop  might 
be,  on  the  average,  in  use  two  or  three  times  as  long  as 
another  machine  of  the  same  cost,  it  will  be  realised  how 
very  difierent  the  charges  should  be  to  the  various  jobs  on 
which  they  are  employed."  For  practical  purposes  the 
sixth  factor  referred  to  by  Mr.  Barber  can  usually  be 
considered  with  the  second  or  fourth  factor,  but  it  does  not 

K 


130  FIXED   CAPITAL   AND   DEPRECIATION. 

seem  possible  in  all  cases  in  practice  to  linnit  the  term  to  the 
diminution  in  value  which  arises  solely  from  use.  The  effect 
of  supersession  of  machinery  can  best  be  considered  when 
dealing  with  the  question  of  periodical  valuation  of  plant.* 

The  usual  methods  of  dealing  with  depreciation  include 
either  the  yearly  provision  of — 

(i)  A  fixed  sum. 

(2)  A  fixed  percentage  on  the  original  value. 

(3)  A  fixed  percentage  on  the  diminished  value.      --^ 

(4)  A  sum  to  cover  repairs,  renewals,  and  depreciation. 
Whatever  rule  is  determined  upon,  it  is  important  that 

Ruig  it  should  be  consistently  adhered  to  for  a  term 

shouid^bc  o^  years  in  order  to  avoid  the  accounts  of 
adhered  to.  particular  years  being  treated  abnormally,  which^ 
in  the  case  of  joint-stock  companies,  whose  shares  are 
constantly  changing  hands,  would  lead  to  much  injustice 
being  done  to  individual  proprietors. 

In  many  manufacturing  businesses  the  rough-and-ready 
method  is  adopted  of  charging  to  capital,  in  addition  to 
_  the    original    cost,   the   cost    of    all    renewals, 

The  rough-  .  ^  '  .  ^    1        t  i- 

and-ready      alterations,   and    extensions   oi    buildings   and 

method.  ,  .  '  ,  .  ,  ,,  • 

machinery ;  and,  without  any  allocation  of 
machinery  costs  to  the  articles  manufactured  or  produced, 
to  debit  profit  and  loss  account  in  respect  of  depreciation 
with  a  percentage  of  the  total  amount  in  the  Ledger  under 

*  In  a  paper  read  on  9th  January  1917,  before  the  Scottish  Section  of  the 
Institution  of  Electrical  Engineers,  by  Messrs.  Cook  and  Gill,  on  "The 
Principles  Involved  in  Computing  the  Depreciation  of  Plant,"  the  authors  state 
that  by  them  the  term  "depreciation"  is  intended  to  cover  (i)  Provision  for 
the  diminution  in  value  of  plant  in  place  and  working  (that  is,  its  loss  in  value 
to  the  owner  as  a  continuing  plant),  by  reason  of  causes  outside  his  control, 
such  as  age,  wear,  and  accidents.  This  provision  they  call  "Renewals." 
(2)  Provision  to  enable  the  owner  to  take  plant  out  of  commission  before  its 
physical  life  is  exhausted  in  cases  where,  from  either  progress  of  the  art  or 
growth  of  the  business,  it  is  economically  advisable  to  do  so  (that  is,  by  reason 
of  causes  within  his  control).     This  provision  they  call  "  Improvements." 


VARYING   VIEWS   ON    DEPRECIATION.  I3I 

those  heads.  In  few  factories,  however,  could  a  general 
rate  of  depreciation  produce  accurate  results.  Rates  of 
depreciation  naturally  vary  with  the  class  and  character  of 
the  machinery  and  plant,  and  their  life  and  residual  value. 
The  rates  are  based  on  the  original  cost,  or  on  the  yearly 
reducing  balance  of  the  account.  In  the  latter  event  a 
higher  percentage  rate  has  necessarily  to  be  used.  The 
"  Comparative  Depreciation  Tables,"  compiled  by  Mr. 
Lawrence  R.  Dicksee,  set  out  the  equivalent  rates  side  by 
side,  and   in   practice  are  of  considerable  use. 

Repairs  ,-,,  .  , 

charged  to      When,  as  m  some  cases,  even  the  current  re- 

capital,  .  ,  ,  .      ,  .  . 

pairs  are  charged  to  capital,  a  proportionately 
larger  percentage  should  be  written  off  annually  for 
depreciation.  The  theory  of  the  double  account  system, 
which  is  generally  used  in  connection  with  railways,  gas, 
water,  electric  light,  tramway  and  similar  undertakings, 
whose  assets  are  commonly  described  as  of  a  permanent 
character,  is  that  the  capital,  having  been  raised  for  the 
purposes  of  a  permanent  undertaking,  should  be  kept  in 
a  separate  account  apart  from  the  revenue  raised  there- 
from, that  fluctuations  in  value  of  capital  assets  should 
be  disregarded,  that  they  should  continue  to  stand  at 
cost,  and  that  profit  was  the  excess  of  income  over 
expenditure,  without  regard  to  the  position  of  the  capital 
account. 

In  some  cases  proprietors  are  content  to  charge  their 
profit  and  loss  account  with  an  estimated  fixed  sum  yearly 
for  depreciation,  and  they  include  under  this  term  repairs 
and  renewals.  The  amount  so  charged  they  credit  to  a 
Depreciation  Account  or  Fund,  and  debit  the  account  with 
the  amount  expended  in  repairs  and  renewals. 

The  principle  of  an  annual  average  charge  is  defensible 
on  some  grounds,  but  if  applied  to  an  account  which 
includes  such  dissimilar  factors  as  depreciation,  renewals, 


132  FIXED   CAPITAL   AND   DEPRECIATION. 

and  repairs,  the  ratio  of  the  fixed  amount  appHcable  to  depre- 
ciation will  vary  with  the  yearly  increase  or  decrease  in  the 
amount  actually  spent  on  repairs  and  renewals.  This  would 
be  obviated  by  keeping  the  Depreciation  Fund  and  the  Repairs 
and  Renewals  Fund  separately.  In  the  case  of  the  latter  fund, 
the  cost  of  repairs  and  renewals  will  naturally  be  lighter  in  the 
earlier  than  in  the  later  years,  and  in  these  years  a  credit 
should  be  arisingon  theaccount,owing  tothecost  notamount- 
ing  to  the  fixed  sum  charged.  Unless  repairs  and  renewals 
are  intentionally  postponed  in  order  that  the  account  may  be 
kept  in  credit,  the  sufficiency  or  otherwise  of  the  charge 
under  normal  conditions,  and  in  the  absence  of  any  accident, 
will  manifest  itself  in  the  credit  balance  in  the  fund. 

In  some  undertakings  no  cognisance  is  taken  of  depre- 
ciation in  the  accounts.  In  the  case  of  most  railways, 
Dcprccia-  ^^^  instance,  the  deterioration  of  the  plant  is 
current*  taken  to  be  adequately  and  fairly  provided  for 

expenditure,  ^y  |-|^g  current  expenditure  upon  repairs  and 
renewals  which  is  debited  to  revenue  account.*  This  prac- 
tice is  defended  on  the  ground  that  by  the  very  nature  of 
railway  property  the  repairs  and  renewals  must  be  at  least 
equivalent  to  the  depreciation,  and  that  an  effectual  check 
against  any  starving  in  maintenance  is  furnished  by  the 
certificates  which  the  heads  of  the  spending  departments 
periodically  give  as  to  the  condition  of  the  permanent  way, 
plant,  tools,  buildings,  and  rolling  stocks.  Such  a  system 
may  possibly  prove  unobjectionable  when,  an  undertaking 
having  been  in  operation  for  a  number  of  years,  a  relation 
has  been  established  between  the  expenditure  and  the 
deterioration  ;  but  there  is  always  a  danger  that  during  its 
earlier  years,  when  expenditure  for  repairs,  renewals,  and 
extensions  is  not  so  imperatively  called  for  as  after  some 

*  In  the  case  of  railways  in  the  United  States  of  America,  depreciation 
accounts  are  prescribed  by  law  in  respect  of  the  rolling  stock,  machinery,  and 
equipment. 


DEPRECIATION    AND   CURRENT   EXPENDITURE.      1 33 

years  of  working,  the  profit  and  loss  account  is  not 
adequately  debited  with  depreciation  ;  and  even  if  this  be 
done,  there  is  nevertheless  the  risk  of  the  accounts  of 
particular  years  being  prejudiced.  It  is  doubtful,  also, 
whether  the  desire  to  maintain  dividends  and  to  show  an 
average  expenditure  per  mile  does  not  lead,  in  the  case  of 
railway  companies,  to  only  such  work  being  done  during 
the  half  year  as  will  approximately  cost  the  average 
amount.     In  the  case  of  water  companies  likewise,  the  item 

of  depreciation  forms  no  part  of  the  accounts. 
Case  of 

water  com-  But  water  companies  are  allowed  by  Act  of  Par- 
pan  es.  liament  to  place  to  a  reserve  fund  surplus  profits 
to  the  extent  of  one-tenth  of  the  capital,  and  as  renewals 
are  paid  for  out  of  profits,  it  follows  that  any  abnormal 
charges  in  respect  of  deterioration  are  indirectly  met  out 
of  this  reserve  fund  ;  consequently  during  the  first  years  of 
working,  when  renewals  and  repairs  are  insignificant,  and  no 
reserve  fund  has  been  formed,  there  is  a  tendency  to  relieve 
revenue  account  of  its  fair  proportion  of  charge  for  wear  and 
tear.  In  general,  it  may  be  stated  that  unless  considerable 
additions  and  extensions  are  constantly  made,  the  system 
of  charging  all  repairs  and  renewals  to  revenue,  but  making 
no  allowance  for  depreciation,  will  not  in  the  long  run  prove 
satisfactory.  Unless  adequate  provision  is  made  a  time 
must  arrive  when,  owing  to  some  of  the  machines  and  tools 
having  become  wholly  obsolete,  or  the  lease  of  buildings 
having  expired,  an  amount  will  have  to  be  debited  to  Profit 
and  Loss  which  should  in  strictness  have  been  borne  by 
Distribution  previous  years.  In  this  way  some  years  are 
won^over  ufe  ^^^^  to  appear  unduly  lucrative  at  the  expense 
of  object.  of  others,  instead  of  the  depreciation  being 
charged  equally  over  the  number  of  years  constituting  the 
life  of  the  object,  in   direct  proportion,  if  possible,  to  the 


134  FIXED   CAPITAL   AND   DEPRECIATION. 

actual  deterioration  incurred  in  each  period.  This  is 
always  at  least  approximately  possible.*     In  certain  cases 

only  can  maintenance  be  said  to  balance  depre- 
tain'casc"'  ciation.  "  In  any  particular  building,  machine, 
nan*cc^*'"**'  ^^  appurtcnance,  decay  or  wear  of  some  sort 
prccraiton!^'  ^nust   take  place   in    the   course   of  time,  and 

repairs,  in  order  to  compensate  fully  for  the 
decline  in  value,  must  take  the  form  of  renewal.  This 
being  the  case,  the  absolute  replacement  of  some  portion 
of  the  plant  every  year  may  thus  maintain  an  average 
aggregate  value.  In  only  two  kinds  or  classes  of  plant, 
however,  can  such  an  exact  balancing  of  loss  by  repairs 
and  renewals  be  ventured  on  ;  one,  where  the  plant  wears 
out  so  quickly  as  to  need  replacement  at  short  intervals, 
affording  constant  proof,  by  the  mere  continuance  of 
working,  that  not  only  the  earning  power  of  the  factory 
is  maintained,  but  also  the  capital  value  ;  and  in  a  second 
class,  that  of  undertakings  so  large  and  permanent  as  to 
afford  a  wide  average  of  deterioration  and  renewal  over 
the  whole  plant."  f  It  is  worthy  of  note,  that  even  in  the 
two  cases  referred  to,  Mr.  Matheson  speaks  with  some 
hesitancy,  and  alludes  to  such  a  mode  of  procedure  as  a 
venture.  There  is  the  certainty  of  plant  deteriorating  in 
time,  and  always  the  risk  of  plant  gradually  becoming 
obsolete,  even  though  kept  in  good  repair.  In  some  cases 
it  is  desirable  to  provide  for  obsolescence  by  means  of  a 
general  reserve,  and  not  to  consider  it  as  a  factor  in  depre- 

*  Some  interesting  details  of  the  evolution  of  methods  of  charging  deprecia- 
tion in  the  accounts  of  Telephone  Companies  in  the  United  States  are  given 
by  C.  G.  Dubois,  Comptroller  of  American  Telephone  and  Telegraph  Company, 
in  a  lecture,  "A  Brief  History  of  Telephone  Accounting,"  delivered  to  the 
students  of  the  Agnes  Tuck  School  of  Administration  and  Finance  on 
February  lo,  1913. 

t  "The  Depreciation  of  Factories,  and  their  Valuation."  Matheson. 
London.     Spon. 


DEPRECIATION   AND   OBSOLESCENCE.  1 35 

ciation.  Some  check  in  the  sufficiency  of  this  provision 
when  this  course  is  adopted  is  afforded  by  charging  to  this 
account  the  cost  of  all  replacements  due  to  supersession. 

In  some  instances  the  amount  charged  to  revenue  account 
for  depreciation  is  a  fixed  sum,  often  arrived  at  by  charging 
an  equal  proportion  of  the  cost  against  each  year  of  the 
working  life  of  the  object,  or  by  an  arbitrary  percentage  on 
the  book  value,  or  by  way  of  a  constant  percentage  fixed 
at  a  rate  calculated  to  reduce  the  asset  to  its  residual  value 
in  a  prescribed  term.  In  others  it  varies  according  to  the 
business  effected,  or  to  the  balance  remaining  to  profit  and 

loss  account,  or  is  regulated  by  the  desire  of  the 
methods  in     firm  Or  its  managers,  either  on  the  one  hand  to 

show  a  large  profit,  or  on  the  other  to  add  to  the 
stability  of  the  concern.  In  comparatively  few  establish- 
ments, however,  is  the  endeavour   made  to  approximate 

systematically  the  amount  charged  to  revenue 
that'acufai'  for  depreciation,  to  the  actual  deterioration 
tionVs°'*'  which  has  taken  place,  and  still  more  rarely  is 
charged.  j^  attempted,  when  the  actual  depreciation  has 
been  ascertained,  to  allocate  it  to  the  various  departments 
in  which  it  has  been  incurred,  or  more  accurately,  to  the 
various  operations  which  have  been  carried  on. 

The  direct  way  of  determining  the  depreciation  or  appre- 
ciation of  the  assets  of  an  undertaking  would  prima  facie 
Periodical  appear  to  be  by  means  of  a  revaluation  of  all 
th*"^rcct  ^^^  properties  at  periodical  times.  In  the  case 
method.  Qf  trades  in  which  the  wear  and  tear  of  plant  is 

proportionate  to  the  work  done  this  course  would  have  the 
advantage  of  charging  fairly  the  deterioration  due  respec- 
tively to  a  period  of  brisk  trade  and  to  a  time  of  depression, 
by  manifesting  in  the  former  period  a  greater  degree  of 
wear  and  tear  due  to  a  larger  volume  of  business,  or  to  time 
contracts  compelling  a  resort  to  overtime,  or  in  times  of 


136  FIXED   CAPITAL   AND   DEPRECIATION. 

extreme  pressure  such  as  may  arise  during  war,  the  extra 
wear  and  tear  of  machinery  that  may  arise  by  machines 
being  worked  by  unskilled  labour,  or  by  labour  less  skilful 
than  usual ;  while  in  periods  of  depression  a  smaller 
amount  would  obviously  be  chargeable  for  depreciation, 
much  of  the  machinery  and  plant  having  probably  stood 
idle.  But  this  method  would  in  the  majority  of  trades  lead 
to  such  enormous  fluctuations  in  the  profit  and 
tagcs  of  this  loss  account,  especially  if  the  periodical  valua- 
tion was  based  upon  the  market  price  of  the 
assets  taken  singly,  and  not  simply  upon  their  value  as 
integral  portions  of  a  "going  concern,"  that,  except  in  a 
few  trades,  it  would  be  impracticable.  This  would  especi- 
ally be  the  case  when  raw  material,  subject  to  market 
fluctuations,  formed  a  large  proportion  of  the  plant  and 
stock-in-trade.  Such  a  method  as  an  annual  practice 
would  often  be  a  fruitful  source  of  confusion  and  error, 
although  of  great  benefit  if  taken  at  five  or  seven  year 
periods,  or  on  some  special  occasions  such  as  the  sale  of 
the  business.  In  short,  to  write  off  only  such  portion  of 
the  cost  of  the  plant  as  represents  the  apparent  deteriora- 
tion that  has  taken  place  would  be  fallacious. 
only  mani-      Althougli    machinery   or   plant    may  show    no 

fcst  dctcri-  .  ^      ,...,,  ,  ,  . 

oration  fai-  signs  ot  dimmished  value  or  loss  of  earnmg 
power,  yet  its  term  of  life  and  its  value  in  the 
market  must  be  lessened  by  lapse  of  time.  A  periodical 
survey  of  all  buildings,  plant,  etc.,  is,  however,  very  im- 
portant, and  would  serve,  if  for  no  other  purpose,  as  a  very 
valuable  check  upon  the  system  of  calculating  depreciation 
that  may  be  adopted.  Such  a  survey  is  of  additional 
importance  in  view  of  the  great  advance  that  has  been 
made  in  recent  years  in  many  classes  of  machinery,  which 
renders  desirable  the  supersession  of  machines  of  old  types 
though  in  perfect  working  order  by  machines  of  a  new  and 


PERIODICAL   REVALUATION.  1 37 

often  more  costly  type,  in  the  interests  of  economical 
working.  In  such  cases  the  life  rate,  unless  based  on  a 
short  expectation  of  profitable  use,  will  leave  a  substantial 
sum  to  be  dealt  with  when  the  machinery  is  scrapped. 

A  periodical  valuation  of  the  assets,  as  the  basis  of  a 

depreciation    rate,  however,  raises  considerations  of  very 

great  significance,  such  as  the  question  of  the 

Profit  and         ...  -       ,  ... 

loss  on  mterdependence   oi    the    revenue    and    capital 

accounts,  and  the  question  of  how  far  a  loss  or 
profit  on  capital  account,  i.e.,  a  diminution  or  increase  in 
the  realisable  value  of  any  of  the  assets,  should  affect  the 
profit  and  loss  account.  These  are  points  of  considerable 
interest,  and  deserve  to  be  discussed  to  a  greater  extent 
than  the  limits  of  this  work  will  permit.  The  following 
observations  by  a  leading  authority  on  the  law  relating  to 
joint-stock  companies  are,  however,  very  apposite  : — 

"  Capital  may  be  lost  in  either  one  of  two  ways,  which 
may  be  distinguished  as  loss  on  capital  account,  and  loss 
on  revenue  account.  If  a  ship-owning  company's  capital  be 
represented  by  ten  ships  with  which  it  trades,  and  one  is 
totally  lost  and  is  uninsured,  such  a  loss  would  be  what  is 
here  called  a  loss  on  capital  account.     But  if  the 

Opinion  ol  i         •  i  ■   i        i 

Lord  Justice  Same  company  begms  the  year  with  the  ten 
ships,  value  say  iS^  100,000,  and  ends  the  year 
with  the  same  ten  ships,  and  the  result  of  the  trading,  after 
allowing  for  depreciation  of  the  ships,  is  a  loss  of  ^looo, 
this  would  be  what  is  here  called  a  loss  on  revenue  account. 
"  W^here  a  loss  on  revenue  account  has  been  sustained, 
there  is  of  course  no  profit  until  that  loss  has  been  made 
good  either  by  set-off  of  previous  undivided  profits  still  in 
hand,  or  by  profits  subsequently  earned.  But  until  the  case 
of  Neuchatel  Asphalte  Company  the  question  was  open 
whether  a  company  under  the  Companies  Acts,  which  has 
lost  part  of  its  capital  by  loss  on  capital  account,  can  con- 


138  FIXED   CAPITAL   AND   DEPRECIATION. 

tinue  to  pay  dividends  until  the  lost  capital  has  been  made 
good. 

"  That  case  showed  the  true  principle  to  be,  that  capital 
account  and  revenue  account  are  distinct  accounts,  and  that 
for  the  purpose  of  determining  profits  you  must  disregard 
accretions  to  or  diminution  of  capital.  Suppose  I  buy  ;^ioo 
Consols,  at  97,  and  at  the  expiration  of  a  year  they  have 
fallen  to  94,  is  my  income  ^3  or  nothing?  If  nothing,  then 
if  at  the  expiration  of  the  year  they  had  risen  to  par,  my 
income  would  by  parity  of  reasoning  have  been  £6,  not  £1. 
Is  the  result  affected  by  the  question  whether  at  the  end  of 
the  year  I  am  or  am  not  about  to  sell  my  Consols  ?  Suppose 
a  tramway  company  lays  its  line  when  materials  and  labour 
are  both  dear,  both  subsequently  fall,  and  the  same  line 
could  be  laid  for  half  the  money,  and  as  an  asset  (inde- 
pendent of  deterioration  from  wear)  would  cost  for  con- 
struction only  half  what  it  did  cost.  Is  the  company  to 
make  this  good  to  capital  before  it  pays  further  dividend  ? 
If  so,  then  if  the  cost  of  materials  and  labour  had  risen 
after  the  line  was  laid,  might  not  the  company  have  divided 
as  dividend  this  accretion  to  capital  ?  Upon  such  a  principle 
dividends  would  vary  enormously,  and  sometimes  inversely 
to  the  actual  profit  of  the  concern. 

"  If  revenue  account  be  treated  as  a  distinct  account,  these 
difficulties  disappear,  and  subject  to  the  difficulty  which 
must  be  encountered  of  discriminating  between  revenue 
charges  and  capital  charges,  a  safe  and  intelligible  principle 
is  arrived  at.  The  creditors  of  the  company  are  entitled  to 
have  the  capital  account  fairly  and  properly  kept;  but  they 
are  not  entitled  to  have  losses  of  capital  on  capital  account 
made  good  out  of  revenue.  It  is  no  doubt  true,  that  before 
arriving  at  revenue  at  all  there  are  payments  which  must 
be  made  good  to  capital,  on  account  of  capital  wasted  or 
lost  in  earning  the  revenue.     For  instance,  in  the  common 


INTERDEPENDENCE   OF   REVENUE   AND   CAPITAL.      1 39 

case  of  leaseholds,  which  are  a  wasting  property,  the  whole 
of  the  rental  will  not  properly  be  income ;  in  the  case  of 
colliery  properties,  the  difference  between  the  price  at 
which  the  coal  is  sold,  and  the  cost  of  working  and  raising 
it,  will  not  all  be  income,  for  there  must  also  be  a  deduction 
made  in  favour  of  capital  representing  the  diminished  value 
of  the  mine  by  reason  of  its  containing  so  many  less  tons 
of  coal ;  in  the  case  of  a  tramway  company,  you  will  not 
have  arrived  at  net  profit  before  you  have  set  apart  a  sum 
to  make  good  deterioration.  But  when  all  proper  allow- 
ances have  thus  been  made  in  favour  of  capital,  the  balance 
is  revenue  applicable  for  payment  of  dividend."  * 

The  reports  of  the  Neuchatel  case  (C.  A.,  1 889, 41  C.  D.  i ) 
show  that  the  articles  of  association  of  the  company  ex- 
pressly provided  that  it  should  not  be  necessary  for  the 
directors  to  provide  for  the  waste  of  the  assets  before  the 
declaration  of  a  dividend. 

In  the  case  of  Bolton  v.  Natal  Land  and  Colonisation 
Company  (C.  D.,  December  1891),  an  assumed  rise  on  the 
value  of  fixed  assets  was  set  off  against  a  decrease  in  the 
value  of  floating  assets,  and  the  point  to  be  decided  by 
the  Court  was  whether  it  was  necessary  to  write  down 
land  to  its  true  value  before  declaring  a  dividend,  and  it 
was  held  that  a  company  may  declare  a  dividend  out  of 
current  profits  without  being  obliged  to  show  that  its 
capital  is  intact.  In  Verner  v.  The  General  Commercial 
and  Investment  Trust,  Ltd.  (1894,  2  C.  239),  Lord  Lindley 
drew  a  distinction  between  fixed  and  circulating  capital, 
holding   that   depreciation    of  the    former   need    not,  but 

*  "The  Law  and  Practice  under  the  Companies  Acts."  H.  Burton 
Buckley.     London  :  Stevens  &  Haynes. 

In  some  earlier  cases,  e.g..  The  Ebbw  Vale  Steel  and  Iron  Co.,  Ltd.,  and 
Dent  V.  London  Tramways,  Ltd.,  the  extreme  view  that  no  profits  were  avail- 
able for  distribution  until  lost  capital  had  been  replaced,  seems  to  have  been 
taken. 


140  FIXED   CAPITAL   AND   DEPRECIATION. 

depreciation  of  the  latter  must,  be  charged  to  profit  and 
loss. 

In  Wilmer  v.  McNamara  &  Co.,  Ltd.  (Chancery,  April 
1895),  involving  the  depreciation  of  leaseholds,  it  was  also 
held  that  a  company  cannot  be  restrained  from  declaring 
a  dividend  out  of  current  profits,  because  no  provision  has 
been  made  for  the  depreciation  of  fixed  assets. 

In  the  case  of  Bond  v.  The  Barrow  Haematite  Steel  Co., 
Ltd.,  money  invested  in  land,  mines,  and  furnaces  which 
were  abandoned  was  considered  as  circulating  capital, 
and  as  analogous  to  buying  ore  in  advance,  and  it  was 
held  that  the  directors  did  right  in  making  good  the  loss 
out  of  profits. 

The  judgment  in  the  case  of  the  National  Bank  of  Wales 
V.  Cory  does  not  run  counter  to  these  decisions  ;  but  the 
Lord  Chancellor  (Lord  Halsbury)  stated  that  he  must 
decline  to  express  an  opinion  not  called  for  by  the  par- 
ticular facts  before  the  tribunal,  and  that  when  the  question 
of  whether  dividends  were  properly  paid  came  before  the 
Court,  he  foresaw  that  many  matters  would  have  to  be 
considered  by  men  of  business,  which  were  not  altogether 
familiar  to  a  court  of  law. 

The  question  of  payment  of  dividend  out  of  capital 
surplus  has  arisen  in  two  leading  cases. 

In  Lubbock  v.  The  British  Bank  of  South  America,  Ltd. 
(2  Ch.  D.,  April  1892),  it  was  held  that  if  a  company's 
articles  of  association  so  provide,  a  profit  made  on  the 
sale  of  a  part  of  the  undertaking  is  available  for  dividend. 
In  connection  with  this  case,  the  important  distinction 
between  capital  used  in  a  concrete,  and  in  an  abstract  sense 
as  "capital  values"  should  be  pointed  out.  It  was  suggested 
that  since  the  profit  made  was  derived  from  concrete  capital 
assets  of  the  bank,  it  could  not  be  distributed  as  income, 
but   the    decision   of  the    Court    showed    that   it   was   the 


LEGAL   DECLSIONS   SUMMARISED.  I4I 

statutory  capital  or  capital  values,  and  not  concrete  assets 
which  had  to  be  conserved,  and  provided  the  paid-up 
capital  was  represented  by  sufficient  assets,  there  was  no 
return  of  capital  to  the  shareholders.  In  Foster  v.  The  New 
Trinidad  Lake  Asphalte  Co.,  Ltd.  (C.  D.,  November  1900), 
it  was  held  that  an  unexpected  appreciation  in  the  value 
of  assets  taken  on  by  a  company  at  its  formation  is  not 
profit  available  for  dividend,  even  though  the  asset  in 
question  be  a  book  debt. 

From  these  decisions  it  would  seem  that  legally — 
Fixed  capital  need  not  be  maintained  intact. 
Dividends  may  be  paid  without  providing  for  depre- 
ciation  on  fixed   assets  and   despite  loss  of  fixed 
capital. 
Floating  or  circulating   capital   must  be  maintained 
intact,  or  the  amount    by  which   it   is  diminished, 
charged  against  revenue. 
Dividends  cannot  be  paid  before  a  loss  on  revenue  is 
made  good. 
An  analogous    point  arises  in   connection  with   assess- 
ments for  rating  purposes.     Following  the  Cambridge  Gas 
Co.  case   in    1838,  many  English    Courts    have    for   these 
purposes  allowed  deductions  for  depreciation,  even  where, 
as  in  the  London,  Brighton  and  South  Coast  Railway  Co. 
case  in  1851,  sums  have  not  been  set  aside  in  the  accounts 
for  depreciation. 

A  similar  view  has  under  like  circumstances  been  taken 
in  the  Courts  of  the  United  States.  Thus,  in  a  case  which 
came  before  the  Railway  Commission  of  Wisconsin  recently, 
the  commissioners  stated  that  depreciation  may  be 
described  as  an  amount  that  must  regularly  be  set  aside 
to  cover  wear  and  tear  in  order  to  keep  the  original  invest- 
ment value.  Depreciation  was,  the  commissioners  decided, 
an  operating  expense  that  should  ultimately  be  borne  by 


142  FIXED   CAPITAL   AND   DEPRECIATION. 

consumers  or  users,  and  that  when  it  is  so  borne  it  should 
be  set  aside  until  needed  for  the  renewal  of  worn-out  or 
useless  parts  of  the  plant. 

Morawetz,  in  his  book  on  "  Private  Corporations,"  ex- 
presses a  general  view  in  stating  that  a  large  number  of 
cases  decided  in  the  English  and  United  States  Courts, 
show  that  in  determining  whether  a  company  is  entitled 
to  pay  a  dividend  to  its  shareholders,  the  property  acquired 
for  permanent  use  in  carrying  on  business  may  be  valued 
at  the  price  actually  paid  for  it,  although  it  could  not  be 
sold  again  except  at  a  loss  ;  even  although  the  business  of 
the  company  should  prove  less  profitable  than  was  antici- 
pated and  the  value  of  the  whole  concern,  and  consequently 
the  value  of  the  shares  representing  it,  should  greatly 
depreciate  in  actual  value,  it  would  not  be  necessary  to 
accumulate  the  profits  until  the  depreciation  had  been 
made  up  and  the  value  of  the  shares  again  raised  to  par. 

All  that  is  required  is,  that  the  whole  capital  originally  con- 
tributed by  the  shareholders  shall  be  put  into  the  business 
and  kept  there,  that  no  part  of  it  shall  be  taken  out  again, 
directly  or  indirectly,  and  given  back  to  the  shareholders. 

While  there  are  some  cases  which  would  seem  to  indi- 
cate that  dividends  may  be  declared  even  though  the 
ordinary  repairs  have  not  been  made  to  the  plant,  it  seems 
to  have  been  held  by  the  majority  of  the  Court  decisions 
that  so  long  as  the  actual  things  constituting  the  capital  of 
the  corporation  be  not  paid  out  to  the  shareholders,  and 
ordinary  repairs  are  made  so  that  the  plant  is  kept  in  good 
working  condition,  dividends  may  be  paid  even  though 
depreciation  has  not  been  taken  care  of 

From  the  economist's  point  of  view,  if  at  a  given  period 
the  realisable  value  of  all  properties,  after  liquidating  all 
liabilities,  is  in  excess  of  the  amount  of  subscribed  capital, 
such    surplus,    whether    the    gain    has    been    made    on 


PROFIT    AND   LOSS   ACCOUNT.  I43 

capital    account   or   revenue   account,   constitutes    profit ; 

while  the  amount  by  which  realisable  assets  fall  short  of 

the  liabilities,  including  the  subscribed  capital, 

cai  view  of     must    be    considered    as    loss.       In     practice, 

*"  '  however,  the  business  man  has  to  distinguish 
between  profits  which  arise  from  trading  and  those  due  to 
increase  in  the  value  of  fixed  assets,  for  the  withdrawal  of 
the  latter  from  the  business  would  correspondingly  decrease 
working  capital,  and  such  profits  are  thus  not  available  for 
Profit  and  distribution.  So  long  as  a  business  is  a  going 
loss  account,  concern,  it  would  probably  be  inadvisable  for 
the  revenue  account  to  serve  the  purpose  of  an  index  of  the 
fluctuations  in  the  market  value  of  the  constant  or  fixed 
assets  essential  to  the  carrying  on  of  the  business,  for  in 
such  a  case  the  revenue  account  would  oscillate  perhaps 
from  a  large  profit  one  year  to  a  large  loss  in  the  next, 
Sinking  although  the  nature,  volume,  or  lucrativeness  of 

fund.  j-j-jg  current  business  may  have  remained  with- 

out abnormal  change.  With  a  view  to  provide  against 
an  eventual  loss  in  the  realisation  of  an  asset  the  value  of 
which  tends  to  decrease,  it  would  probably  be  judicious 
to  establish  a  sinking  fund  by  debiting  the  revenue  account 
annually  with  a  fixed  percentage  to  cover  all  contin- 
gencies. This  would  also  apply  to  plant  which  is  not 
worn  out  before  it  is  replaced  by  improved  machines. 
Similarly,  if  the  asset  is  improving  in  value  we  do  not 
Reserve  recommend  that  the  increment  should  be  placed 
fund.  ^Q  |-]-jg  credit  of  profit  and  loss  account,  but  that 

it  be  debited  to  the  account  of  that  asset  and  credited  to  a 
reserve  fund  opened  to  provide  for  any  future  diminution  in 
its  market  value.  If  there  is  a  sinking  fund,  the  amount 
might  be  placed  to  its  credit. 

Although  it  does  not  seem  practicable  to  lay  down  a 
universal  rule  that  a  loss  on  capital  must  be  made  good 


144  FIXED   CAPITAL   AND   DEPRECIATION. 

before  further  dividends,  if  earned  on  profit  and  loss 
account,  can  be  distributed,  there  are  cases  in  which  it  is 
obviously  necessary  that  this  set-off  should  be  made.  In 
the  case  already  referred  to  of  the  shipping  company  with 
ten  ships,  one  of  which  is  uninsured  and  is  lost,  inasmuch 
as  the  profit  and  loss  account  has  not — from  what  must  be 
assumed  to  be  motives  considered  as  economical — been 
charged  with  the  cost  of  insurance,  and  the  risk  of  loss  has 
been  undertaken,  that  account  must  as  a  consequence  bear 
the  loss  when  it  is  incurred.  Thus  the  account  named  would 
bear  the  total  loss  of  one  ship  and  the  depreciation  of  the  re- 
maining nine.     Indeed,  a  loss  which  might  have 

Insurance         ,  •  ^     ,  ■  ^  • 

against  been    provided    agamst    by    msurance,  or   one 

l0SS6Sa  .  ■  •  . 

which  underwriters  wall  not  insure  except  at  a 
premium  so  high  that  the  firm  prefers  incurring  the  risk  to 
paying  the  cost  of  insurance,  if  not  provided  for  by  the 
creation  of  a  reserve  fund,  is  always  a  fair  charge  to 
profit  and  loss  account.  The  question  whether  or  not 
the  properties  of  a  firm  are  insured  against  fire  has 
always  to  be  considered  in  estimating  the  liabilities  of  a 
concern.  There  are  many  points  connected  with  effecting 
an  insurance,  the  non-observance  of  which  may  invalidate 
the  policy,  and  b}'  omitting  to  examine  the  conditions  of 
their  fire  policies  a  firm  may  find  that  when  part  of  their 
buildings  or  stock  has  been  destroyed  by  fire  they  are  not 
entitled  to  indemnification  by  the  insurers. 

The  Income  Tax  Acts  also  have  an  important  bearing 
upon  the  depreciation  and  valuation  of  assets,  and  no 
Income  Tax  method  of  dealing  with  large  assets  of  fluctuat- 
Acts.  jjig  y^iug  should   be   decided   on  without   due 

regard  being  had  to  the  provisions  of  these  Acts.  Under 
them  everything  in  the  nature  of  property,  which  pro- 
duces or  is  capable  of  producing,  or  itself  consists  in,  an 


Depreciation  on  the  life  basis.  145 

annual  income  or  revenue,  is  subject  to  income  tax.  In 
view  of  the  complexity  of  the  subject,  and  of  the  legal 
provisions  with  regard  to  it,  being  scattered  through  various 
Acts  of  Parliament,  previous  editions  of  this  work  have,  in 
an  Appendix,  contained  a  summary  of  these  provisions. 
In  1918,  however  (8  &  9  Geo.  V.,  Chapter  XL.),  the  pro- 
visions of  the  series  of  Acts  were  embodied  in  an  "  Act 
to  consolidate  the  enactments  relating  to  Income  Tax," 
and  the  facilities  afforded  by  the  Appendix  referred  to 
being  now  made  available  by  the  Consolidation  Act,  an 
Appendix  on  the  subject  is  not  included  in  this  edition. 

The  principle  of  treating  depreciation  as  a  charge  on  the 
business,  and  not  as  a  charge  which  may  or  may  not  be 
met  by  a  provision  out  of  profits,  is  as  applicable  to  private 
undertakings  as  to  limited  liability  companies.  In  a  case 
{in  r^Crabbtree,  106  L.T.Rep.  49)inwhicha  testator  directed 
that  his  business  should  be  carried  on,  and  the  profits 
arising  therefrom  paid  to  his  widow,  it  was  held  that  the 
trustees  must  charge  a  sum  for  depreciation  before  declaring 
profits,  Mr.  Justice  Swinfen  Eady  saying:  "But  in  the 
ordinary  course  of  ascertaining  the  profits  of  a  business 
where  there  is  power  machinery  and  trade  machinery 
which  is  necessary  in  order  to  perform  the  work  of  the 
business,  it  is,  in  my  opinion,  essential  that,  in  addition  to 
all  sums  actually  expended  in  repairing  the  machinery 
or  in  renewing  parts,  there  should  be  written  off  a 
proper  sum  for  depreciation,  and  that  sum  ought  to  be 
written  off  before  you  can  arrive  at  the  net  profits  of 
the  business  or  at  the  profits  of  the  business,  and  it  is  not 
profit  until  a  proper  sum,  varying  with  the  class  of 
machinery,  with  the  nature  of  the  business,  and  with  the 
life  of  the  machinery,  has  been  written  off  for  depreciation." 


CHAPTER    VII. 

MACHINERY   USE. 

Having  dealt  with  the  principles  which  necessitate  charges 
for  the  use  and  depreciation  of  machinery  being  dea't  with 
in  the  ascertainment  of  cost,  we  proceed  with  the  considera- 
tion of  methods  enabling  these  charges  to  be  allocated  to 
the  various  processes  or  articles  of  manufacture.  The  pro- 
cedure to  be  adopted  with  regard  to  lease  redemption  or 
amortisation  does  not  call  for  lengthy  consideration,  but  it 
is  necessary  to  deal  more  fully  with  the  charges  for  the  use 
of  machinery.  These  principles  and  their  application  were 
outlined  for  the  first  time  in  the  first  edition  of  this  work, 
published  in  1887.  Since  then  special  attention  has  been 
given  by  subsequent  writers  to  this  branch  of  the  subject, 
and  to  them  we  are  much  indebted  for  valuable  verification 
of  the  principles  we  advocated  and  their  detailed  con- 
sideration of  the  best  modes  of  applying  them.  The 
extent  to  which  in  certain  industries  the  use  of  machinery 
has  supplanted  or  supplemented  manual  labour  has  strik- 
ingly manifested  the  need  of  considering  mechanical 
labour  or  machinery  use  as  an  item  of  cost,  to  be  ascer- 
tained in  each  manufacturing  operation  with  as  much  detail, 
precision,  and  accuracy  as  the  cost  of  labour  and  material* 

*  "The  enormous  increase  in  the  amount  of  capital  permanently  invested 
in  manufacturing  industries — "fixed  capital,"  as  it  is  called — correspondingly 
increases  the  "  fixed  charges  "  as  an  element  in  cost.  Further,  as  machinery 
supplants  labour  a  change  takes  place  in  the  analysis  of  costs  ;  the  proportion 


DILAPIDATIONS.  I47 

We  then  pointed  out  that  the  best  way  of  arriving  at  a 
machinery  hour-rate,  which  would  include  a  provision  for 
depreciation,  was  to  take  the  life,  that  is  the  expectation  of 
useful  service,  of  a  building  or  machine  as  the  basis  of  the 

rate,  modified  by  the  other  three  factors,  men- 
an  object  the  tioncd   in   the   preceding  chapter,  viz.,  original 

cost  plus  interest,  renovation,  and  residual  value. 
The  method,  however,  is  attended  with  some  difficulties  in 

the  case  of  properties  whose  tenure,  unlike  that 
of  this  of  leases,  is  not  well  defined,  and  also  in  the 

case  of  a  newly  established  business,  to  which 
the  experience  of  other  establishments  has  but  little  appli- 
cation.    Should  the  nature  of  any  particular  business  be 

such  that  the  life  of  the  appurtenances  can  be 
of  thi^  *  **    estimated    with    tolerable    accuracy,   this   plan 

will  be  found  to  be  the  most  scientific  in  its 
operation  ;  for  although  the  life  of  an  asset  may  vary  with 
the  surrounding  conditions,  in  the  same  way  as  the  life  of 
a  horse  depends,  ccEteris  paribus,  upon  the  character  of  the 
work  it  performs,  yet,  if  once  the  life  of  an  asset  has  been 
determined — and  a  manager  of  a  business  which  has  been 
established  for  a  time  should  at  least  be  able  to  frame 
an  approximate  estimate  of  the  durability  of  the  various 
implements  he  employs — there  will  be  no  difficulty  in 
allocating  the  depreciation  to  the  various  processes. 

Leases  for  a  definite  number  of  years,  or  in  perpetuity 
(leases  renewable  from  time  to  time  at  the  option  of  the 

lessee  may  be  regarded  as  leases  in  perpetuity), 
afford  good     afford  a  very  appropriate  illustration  of  the  rule 

illustration.  -    ,        .  ,  ,  .      .  1         i-/- 

of  basmg  the  depreciation  rate  upon  the  life 
of  the  object.     In  Inwood's  "  Tables  for  the  Purchasing  of 

of  fixed  charges,  oncost,  and  expenses  grows,  and  the  proportion  of  wages  to 
total  cost  diminishes." — ^JohnMann,  jun.,  M.A.C.A.,  on  "Oncost  or  Expenses" 
in  the  "  Encyclopaedia  of  Accounting." 


148  MACHINERY   USE. 

Estates"  there  is  a  table  recommended  by  Mr.  Pixley,* 
Amortisa-  which  will  be  found  useful  in  calculating  the 
tion  table.  amount  to  be  set  aside  annually  under  what  is 
known  as  the  Fixed  Instalment  or  Straight  Line  system, 
to  amortise  a  lease,  and  the  table  is  also  applicable  to 
other  properties,  the  life  of  which  has  been  determined. 
Inasmuch  as  the  table  takes  cognisance,  and  correctly  so, 
of  interest  at  the  various  rates  shown,  the  Ledger  account 
of  the  asset  in  question  should  be  debited  each  year  with 
interest  at  a  given  rate  and  credited  with  the  correspond- 
ing amortisation  rate  shown  in  the  table,  until,  at  the 
expiration  of  the  tenure  of  the  lease  or  other  object,  the 
whole  of  the  am'ount  at  which  it  stood  in  the  books  has 
been  exhausted.  The  hypothetical  Ledger  Account  (Speci- 
men No.  38)  of  a  five  years'  lease  from  the  time 
xamp  e.  ^^  .^^  purchase  to  its  expiration  will  serve  to 
elucidate  the  table  referred  to.  The  purchase  price  of  the 
lease  is  taken  at  ^4500,  and  interest  is  calculated  at  5  per 
cent,  per  annum,  which  is  of  course  debited  to  the  lease 
account,  and  credited  to  profit  and  loss  account,  a  corre- 
spondingly larger  amount  being  debited  to  that  account  in 
respect  of  amortisation. 

The  amount  which  is  debited  each  year  to  profit  and  loss 
account  by  way  of  amortisation,  is  arrived  at  by  dividing 
the  amount  of  the  purchase  price,  ^4500,  by  4"329,  the  latter 
being  the  number  in  the  5  per  cent,  column  of  the  table  on 
the  line  corresponding  to  five  years,  that  being  the  number 
of  years  over  which  the  amortisation  is  to  extend,  and  credit- 
ing the  account  each  year  with  the  amount  so  written  off. 

This  procedure  involves  the  charging  against  profits  of  a 
sum  which  will  not  be  represented  by  any  payment  until 
the  expiry  of  the  lease,  when  the  accumulated  fund  may 

*  "Auditors;  their  Duties  and  Responsibilities."  By  F.  W.  Pixley. 
London :  Effingham  Wilson. 


ANNUITY   SYSTEM. 


149 


H 
'A 

O 

cj 
o 

w 

Q 


•d 

"   ' 

-vo 

.| 

-  a^ 

<J\ 

^ 

Tl- 

^7 

« 

0  0 

= 

0   "^ 

"I 

0  "^ 

irj 

000 

oo 

r^ 

- 

Si 

Ov  ldI  u-)|  1  ON  0     0^       0  N  1  ->     1  On  0^ 
00   jl^lOOO    00  10    ONiOilO    0\ 

00 

N 

0 

0      2 

1^ 

u 

By  Profit  and  Loss 

Depreciation 
By  Balance    . 

By  Profit  and  Loss 
„    Balance   . 

By  Profit  and  Loss 
„   Balance    . 

By  Profit  and  Loss 
„  Balance   . 

By  Profit  and  Loss 

H 

End  of  1st  Year 

End  of  2nd  Year 
End  of  3rd  Year 
End  of  4th  Year 
End  of  5th  Year 

-d 

=  ' 

' 

-^ 

0 

vO    f^ 

0^ 

ONfo    ; 

s  '*■ 

Tj- 

^ 

::  :: 

:: 

0   »/■> 

f> 

10  0 

"^ 

10  N 

CX3 

00  as 

::: 

S? 

>-r)M     r^|^i-"CXD|0O>-|a^      O"        |OlO\          O 

0  Cash,  Purchase 

price  . 

0  Interest  at  5  7o 

0  Balance    . 
Intel  est  at  5  7^ 

c.  Balance   . 
Interest  at  5  7^ 

3  Balance  . 
Interest  at  5  7„ 

D  Balance   . 
Interest  at  5  7o 

H      H 

H    -         H    "         H    "         H    "           j 

Of  purchase 
End  of  1st  Year 

End  of  2nd  Year 
End  of  3rd  Year 
End  of  4th  Year 
End  of  5  th  Year 

I50  MACHINERY   USE. 

be  required  for  renewal  purposes.  The  sums  charged 
meanwhile  will  either  have  been  utilised  as  working 
capital,  or  placed  on  deposit,  or  invested  in  securities, 
the  interest  return  in  the  last  two  cases  probably  being 
small  in  comparison  to  that  which  would  accrue  from  the 
first-mentioned  course  being  adopted. 

Recently  there  has  been  considerable  discussion  as  to 
the  comparative  advantages  of  what  has  been  termed  the 
"  straight  line,"  as  compared  with  the  "  sinking  fund," 
method  of  charging  depreciation.  By  the  straight  line 
method,  if  plant  costs  ;!^ioo  and  will  last  twenty  years, 
£S  is  the  annual  depreciation.  The  "  sinking  fund " 
method  takes  interest  into  account.  For  the  same  plant 
for  the  same  period  it  would  be  necessary  to  pay  about 
£S  per  annum  to  a  sinking  fund  if  you  reckon  interest  at 
5  per  cent.,  and  since  interest  ought  also  to  be  paid  upon 
the  capital  employed,  a  further  ;^5  would  be  provided  for 
interest,  making  together  £8  per  annum.  As  has  been 
well  pointed  out  by  Sir  William  Schooling,  the  straight 
line  method  is  only  the  sinking  fund  method  with  interest 
at  o  per  cent. 

It  has  been  urged  with  justification  that,  so  far  as  a 
depreciating  or  wasting  asset  is  concerned,  what  is  known 
as  the  "  Annuity "  system  should  be  employed  for  the 
purpose  of  deciding  whether  it  is  more  advantageous  to 
expend  capital  in  one  direction  than  in  another.  The  pro- 
cedure adopted  under  this  system  is  to  set  aside  annually 
an  amount  which  will  write  off  the  amount  of  capital 
originally  sunk,  plus  interest  thereon,  during  the  time  it 
remains  sunk  in  the  asset.  As  the  amount  of  capital  is  in 
course  of  reduction  each  year,  the  interest  credited  to 
Revenue  becomes  less  each  year,  but  it  is  urged  that  in 
practice  this  reduction  is  in  large  measure,  if  not  altogether, 
compensated    for   by  the   greater    earning   power   of  the 


ANNUITY   SYSTEM.  15I 

accumulated  instalments,  if  used  in  the  working  capital  of 
the  business.  The  "  Annuity  "  system  as  compared  with 
the  "  Fixed  Instalment"  system  lightens  the  earlier  years 
of  amortisation,  but  necessitates  heavier  charges  in  later 
years,  and  involves  in  addition  a  heavier  average  charge. 
In  either  case  the  residual  value  of  the  plant  should  be 
deducted  from  the  original  cost  before  calculating  the 
amount  to  be  written  off  each  year,  as  the  residual  value 
should  be  realisable  at  the  end  of  the  term. 

Where  the  life  of  the  asset,  be  it  leasehold  or  other 
property,  is  of  long  duration,  the  more  economical  course 
is,  by  insurance  or  otherwise,  to  invest  annually  such  a  sum 
as  will  with  the  aid  of  compound  interest  accumulate  to 
the  amount  of  the  original  capital  expenditure  at  the  end 
of  the  life  or  lease.  If  the  investment  be  as  by  way  of  an 
insurance  policy,  no  question  would  arise  as  to  provision 
against  fall  in  values  of  the  securities  in  which  the  sinking 
funds  were  invested.  That  such  question  may  be  one  of 
great  importance  is  shown  by  calculations  made  in  19C9  by 
the  City  Registrar  of  Glasgow,  that  if  the  corporation  had 
invested  its  sinking  funds  year  by  year  in  Consols  for  the 
last  twenty  years,  the  loss  at  prices  current  at  the  time  the 
calculation  was  made  would  have  amounted  to  ^^500,000. 

Messrs.  Gill  &  Cook,*  in  a  paper  on  "  Principles 
Involved  in  Computing  the  Depreciation  of  Plant," 
pointed  out  that  depreciation  concerned  the  engineer,  the 
financier,  and  the  accountant,  and  that  for  these  three 
there  was  only  one  common  method.  This,  in  the  opinion 
of  the  writers  of  the  paper,  was  best  studied  in  the  annual 
charge  for  plant  based  upon  first  cost,  residual  value,  and 
the  physical  and  economic  lives  of  various  classes  of  plant, 
by   estimating   the    charge   for    return   on   capital   and   by 

*  Paper  read  before  the  Scottish  Section  of  the  Institution  of  Electrical 
Engineers,  January  9,  1917. 


152  MACHINERY    USE. 

placing  the  interest  earned  on  reserve  funds  to  the  credit 
of  its  source.  They  urged  the  creation  of  two  funds — a 
Reserve  Fund  for  providing  the  necessary  money  at  the 
end  of  the  physical  life  of  the  plant,  an  Improvements 
Fund  for  providing  sufficient  additional  money  to  enable 
the  plant  to  be  taken  out  of  commission  for  reasons  within 
the  owner's  control,  and  whilst  it  was  still  rendering  the 
service  originally  expected  of  it. 

The  question  of  the  liabilities  of  lessees  for  dilapidation 
and  waste  of  premises  calls  for  some  consideration  in  refer- 
^.,    ._,  ence  to  the  matters  here  referred  to.     If,  under 

Dilapida- 
tions, the  conditions  of  the  lease,  dilapidations  require 

to  be  made  good  upon  its  expiration,  provision  for  the 
necessary  outlays  should  periodically  be  made,  preferably 
through  a  sinking  fund.  A  convenient  summary  in  tabu- 
lated form  of  the  law  relating  to  dilapidations  will  be  found 
in  Mr.  Fletcher's  book  on  the  subject.* 

In  many  businesses  it  may  be  found  advisable,  for  the 
purpose  of  estimating  depreciation,  to  divide  the  objects 
into  classes,  for  although  the  general  result  of  the  business 
operations  during  a  given  time  may  be  normal,  yet  by 
dealing  separately  with  the  depreciation  of  each  class  of 
appurtenance  it  may  be  found  that  some  of  the  depart- 
ments show  abnormal  results.     A  general  rate 

Classifica-  -     ,  .      .  ,        ,         .       ,       ,  , 

tion  of  of  depreciation  may  lead  principals  to  neglect 

what,  comparatively,   may  be  more  profitable 

operations ;  or  to  push  a  department  of  the  business  which, 

if  it  bore  its  full  proportion  of  depreciation,  would  yield 

less  than  the  average  rate  of  profit. 

This  separation  of  departments  is  the   more  desirable 
as  the  same    method    of  allocation  will    obvi- 

and  loose        ously  not  apply  to  loose   plant  and    tools  and 
to  plant  and  tools  which  are  fixed. 

*  "Dilapidations.'"     Banister  Fletcher.     London:  Batsford. 


LOOSE   PLANT.  153 

Although  it  is  theoretically  possible  to  frame  a  scheme 
which  would  enable  the  cost  of  the  loose  plant  and  tools 
to  be  allocated  to  the  various  working  orders,  generally  it 
would  in  practice  be  found  not  worth  while  to  carry  it  out. 
The  cost  of  these  tools,  even  in  a  large  establishment,  is 
comparatively  small,  and  under  ordinary  circumstances  the 
depreciation  of  loose  plant,  tools,  and  patterns  so  slight  on 
any  one  working  order  that  it  simply  suffices  to  book  all 
these  implements  out  to  a  loose  tools  and  plant  account  for 
each  shop  or  department.  In  many  cases  it  is  usual  at  the 
end  of  the  year  to  allocate  this  account  to  profit  and  loss, 
and  in  others,  to  make  an  inventory  of  the  tools  and  their 
value  at  that  period,  and  to  write  off  to  profit  and  loss 
account  through  a  shop  expenses  or  similar  account  a 
proportion,  often  25  to  35  per  cent.,  of  the  total  of  the 
book  value  of  the  loose  tools  and  plant  in  use.  It  is 
evident  that,  if  desired,  some  percentage  ratio  could  be 
established  between  this  loose  tools  and  plant  account  and 
the  amount  spent  on  wages,  and  thereby  the  cost  be 
allocated  to  any  given  working  number  ;  or  the  loose  plant 
and  tools  might  be  re-valued  annually,  the  difference  in 
value  being  carried  to  profit  and  loss,  and  the  cost  of  their 
repair  during  the  year  charged  direct  to  profit  and  loss 
account.  In  either  of  these  cases  the  amount  charged  to 
profit  and  loss  could  be  allocated  in  common  with  the 
indirect  factory  expenses  as  a  percentage  upon  wages,  as 
explained  in  the  chapter  on  the  allocation  of  indirect 
or  incidental  expenses.  That  there  may  be  a  more 
effective  check  on  the  cost  of  tools,  and  to  aid  in  the 
prevention  of  their  misappropriation,  it  is  often  made  a 
shop  rule  that  no  tools  to  replace  any  worn  out  are 
issued  without  part  or  parts  of  the  latter  being  returned 
to  the  stores. 

Kits    of,    or    additional,   tools    supplied    to    out-workers 


154 


MACHINERY   USE. 


U 


3=S 

H6 

"  c  o 

Q 

1 

(Si 

II 

0^ 

Si 

0) 
J3    O 

'(5 
Q 

should  be  charged  out  to  the 
employees  responsible  for  their 
custody,  who  should  periodi- 
cally certify  as  to  the  charac- 
ter, quantity,  and  condition 
of  the  tools  in  their  charge, 
any  difference  in  value  being 
charged  in  the  same  way  as 
the  difference  found  to  exist 
in  the  similar  account  at  the 
factory. 

The  more  valuable  of  the 
loose  tools,  when  not  in  use, 
may  be  kept  in  the  custody 
of  the  foreman,  who,  when 
issuing  them,  should  record 
such  issue  and  obtain  a 
receipt  in  a  Loose  Tools 
Register.  When  lockers  are 
provided  at  the  benches  for 
storing  the  loose  tools  usually 
used  by  the  workmen,  a  card 
should  be  placed  in  the  locker, 
recording  the  contents  from 
time  to  time.  The  value  of 
the  loose  tools  in  the  shops 
will  not,  under  normal  circum- 
stances, vary  very  widely  at 
stocktaking  periods,  and  any 
large  mistake  should  be  dis- 
covered by  comparison.  If 
the  store  system  suggested  in 
previous  chapters  is  adopted, 
the    mistake    of    loose    plant 


EXPENDITURE   ON    PLANT.  155 

being  sometimes  included  in  the  stores  surveys  cannot 
arise,  and  thus  when  the  loose  plant  is  either  not  surveyed 
or  incorrectly  appraised,  unduly  increasing  the  profit 
earned. 

The  same  methods  are  applicable  to  the  patterns  account, 
save  that  it  may  be  desirable  to  place  a  heavier  deprecia- 
tion rate  on  some  patterns  or  moulds  than  on  others,  as  a 
provision  against  their  becoming  obsolete.  Patterns  made 
for  a  special  order,  which  is  not  likely  to  be  repeated,  or 
repeated  only  after  a  considerable  interval,  should  be  taken 
at  a  merely  nominal  value,  and  the  balance  of  the  amount 
spent  on  them  should  be  transferred  to  the  stock  order,  for 
the  execution  of  which  the  patterns  were  made.  In  the 
valuation  of  patented  patterns,  it  must  be  remembered  that 
the  special  value  is  in  the  patent,  and  not  in  the  material 
of  which  the  pattern  is  made.  The  rates  of  depreciation 
on  patterns  will  vary  very  widely,  and  it  is  desirable  that, 
as  far  as  can  be  done,  the  patterns  should  be  classified. 

With  fixed  plant  and  machinery  the  case  is  different. 
Each  distinctive  object  should  be  numbered,  and  its  value, 
Plant  together  with  a  description  of  the  machine,  a 

Ledger.  record  of  its  loose  parts,  and  the  name  of  the 

supplier,  be  entered  in  a  Machinery  or  Plant  Ledger 
(Specimen  No.  39). 

All  material  issued  for,  or  time  spent  on,  any 
Ex  cnditurc  "^^chine  or  implement  belonging  to  this  cate- 
on  Plant.  gory,  whether  for  running,  maintenance,  or 
renewal,  should  be  duly  recorded  in  the  same  way  as  the 
materials  and  wages  consumed  in  the  manufacture  of  stock 
(see  Chapters  II.,  III.,  IV.).  The  expenditure  on  the 
various  machines  and  other  objects  constituting  the  Plant 
may  be  carried  direct  to  the  respective  accounts  in  the 
Plant  Ledger,  in  which  case  the  total  amount  of  wages, 
material,  and    sundry    disbursements   in    the    Commercial 


156 


MACHINERY   USE. 


Ledger  would,  for  any  given  period,  agree  with  the  totals 
under  similar  heads  debited  to  the  Plant  Ledger  and 
the  Cost  Ledger  taken  together,  or  the  expenditure  may 
appear  in  the  Cost  Ledger  to  the  debit  of  the  respective 
Plant  Working  Numbers.  Instead,  however,  of  the  latter 
accounts  in  the  Cost  Ledger  being  credited  by  a  transfer 
to  stock,  as  in  the  case  of  a  Stock  Order,  they  would  be 
credited  by  a  transfer  to  plant — a  Plant  Debit  note  (Speci- 
men No.  40)  being  the  medium.  In  either  case  the  cost 
PLANT  DEBIT  NOTE.— SPECIMEN  No.  40. 
Machines  at  "Work  in  Shop  on 19     . 


No.  of 
Machine. 

Employed 
on  Order 

No. 

Time  Working 
between. 

To  be  filled  in  by  Time  Clerk 
or  Machine  Checker. 

Time 
Working. 

Rate  to  be 
Charged. 

Amount. 

of,  or  expenditure  upon,  plant  is  carried  to  the  debit  of  the 
various  accounts  in  the  Plant  Ledger,  and  the  process  by 
which  the  amount  written  off  in  respect  of  use  and 
depreciation  is  credited  to  the  Plant  Ledger,  and  debited 
to  the  Working  Orders,  which  are  to  bear  their  proportion 
of  the  charge,  is  as  follows.  The  time  clerk  or  an  assistant, 
or  in  a  large  establishment  a  machine  checker,  should 
obtain  each  day  from  the  foreman  of  the  shop  an  account 
of  the  time  during  which  each  machine  has  been  working, 
„,     ,  and  to  what  order  number  the  work  was  done. 

Plant 

return.  j\^  the  end  of  each  week,  or  other  convenient 

period,  a  Plant  Return  (Specimen  No.  41)  should  be 
compiled  and  sent  to  the  counting-house. 

The  back  of  this  form  could  be  used  for  recording  the 


PLANT   LEDGER. 


157 


number   of  hours  the  different  machines  were  running  or 

were  idle,  and    comparing   the   amount  earned   with   the 

value  of  the  hours   lost.      The   rulings  should   show  the 

machine  number,  the  rate  per  hour,  hours  working,  hours  idle, 

the  amount  earned  and  amounts  earnable,  but  not  earned. 

PLANT  DEBIT   SUMMARY.— Specimen  No.  41. 

Return  of  Machinery  at  Work  ami  Charges  to  be  made  for  ■ 

ending ig     . 


No.  of 

Machine. 

Order 

No. 

Order 
No. 

Order 
No. 

Order 
No. 

Order 
No. 

Order 

No. 

Total 
for  each 
Machine. 

Total  for 
each  Order 

The  life  of  a  machine,  or,  in  other  words,  the  number  of 
working  hours  of  average  effective  service  a  machine  will 
Original  ^^st,  being  known,  the  principal  or  some  other 
ii?|*o*'^^  competent  person  would  establish  a  ratio  between 
object.  gyj,j^  working  hours  and  the  cost  of  the  machine, 

including  therein  its  original  value,  installation,  mainten- 
ance, and  other  charges,  and  allowing  for  residual  value.* 
In  fixing  the  ratio  or  ratios,  consideration  is  necessarily- 
given  to  the  fact  that  the  depreciation  of  the  moving 
parts  of  a  machine  stand  in  more  direct  relation  to  the 
number  of  hours  worked  than  do  the  structural  portions. 
These,  however,  are  but  some  of  the  considerations  which 
enter  into  the  fixing  of  the  rates  for  machinery  use;  the 
"rest"  time  for  overhauling,  and  many  other  factors,  enter 

*  As  indicative  of  the  greater  attention  now  being  given  to  the  matter  of 
effective  working  hours,  it  may  be  mentioned  that  in  1910  the  charge  for 
depreciation  of  machinery  at  the  Glasgow  Cotton  Spinning  Mills  was  reduced 
on  account  of  shortened  hours  of  work. 


158  MACHINERY   USE. 

into  a  scientific  make-up  of  the  rate.*  On  this  basis  a 
voucher  would  be  prepared  in  the  office  for  passing  through 
Plant  ^^^    Cost    Ledger    the   debits   to    the    various 

Journal.  working  orders,  and  the  credits  to  machinery 
accounts  under  the  various  numbers  of  the  machines  ;  or, 
in  place  of  these  vouchers,  it  may  be  found  convenient  to 
enter  all  the  details  through  a  Plant  Journal.  When  the 
machine  is  worn  out,  it  should  be  sent  into  Stores  with  a 
Plant  Recovered  Note  showing  its  estimated  realisable 
Residual  value,  at  which  amount  it  becomes  a  credit  to 
value.  capital.      Any   credit   or    debit    balance    that 

remains  on  the  book  value  of  the  machine  may,  as  thought 
desirable,  either  be  carried  to  the  profit  and  loss  account 
or  to  a  reserve  fund,  should  one  have  been  opened  to  pro- 
vide against  loss  on  plant.  Should  it  be  found  that  the 
machine  is  likely  to  have  a  longer  life,  or  to  give  more 
working  hours  than  was  expected,  the  rate  per  hour  may 
of  course  be  diminished,  so  that  future  working  orders  may 
not  be  debited  at  a  higher  rate  than  is  necessary,  and 
equilibrium  on  the  debit  and  credit  sides  of  the  Plant 
Ledger  be  produced.  In  some  cases,  instead  of  each 
machine  being  dealt  with  separately,  the  machinery  is 
grouped,  and  the  rate  fixed  is  applied  to  the  group.  This 
method  does  not  bring  out  the  results  of  the  working  of 
each  machine,  but  only  of  a  class  of  machines.  Whatever 
method  is  adopted,  the  account  or  accounts  will  be  charged 
not  only  with  the  expenditure  directly  incurred  on   the 

*  The  depreciation  problem  may  be  viewed  from  two  standpoints — that  of 
the  accountant  and  that  of  the  engineer.  The  engineer  deals  with  physical 
conditions,  studies  plant  deterioration,  the  necessity  of  replacement,  and  so  on. 
The  accountant  devises  the  ways  and  means  of  recording,  in  the  most  intelligent 
manner,  the  facts  in  connection  with  the  charges.  The  work  of  the  two 
should  be  correlated  through  a  common  understanding  of  the  character  and 
extent  of  depreciation.  "  Principles  of  Depreciation."  Earle  A.  Salicis. 
Yale  University. 


UNIT  OF   PRODUCT   BASIS.  159 

machine,  but  with  its  due  proportion  of  site  or  rental 
charges,  rates,  lighting  and  heating,  in  proportion  to  the 
space  occupied  by  it.  Charges  also  arise  in  connection 
with  the  supply  of  power,  of  participation  in  the  general 
services  of  the  works  and  the  undertaking.  The  capital 
charge  in  connection  with  the  purchase  and  installation  of 
the  machine  has  already  been  referred  to,  and  for  com- 
parison with  hand  labour,  the  interest  on  such  capital 
should  also  be  included. 

The  increasing  recognition  of  the  need  for  the  system- 
atic treatment  of  depreciation  is  evidenced  by  the  atten- 
tion now  given  to  the  subject  by  accountants,*  engineers,^ 
and  managers.^ 

To  a  large  extent  the  discussion  has  centred  on  one  or 
two  general  principles,  such  as  the  adequacy  of  the  amount 
written  off,  the  rates  of  percentage  on  various  classes  of 
machinery,  and  whether  the  rates  should  be  based  on 
original  cost  or  yearly  diminishing  values,  as  these  two 
methods  produce  widely  divergent  results  in  the  accounts 
year  by  year.  The  incidence  of  depreciation  on  the  cost 
of  the  product  has  received  but  scant  attention.  It  has 
been  proposed  that  by  means  of  a  register  of  plant,  separate 
accounts  should  be  kept  for  different  classes  of  machinery, 
showing  the  original  cost,  the  maintenance  and  renewal 
expenditure,  the  yearly  percentage  written  off  original 
value,  and  the  present  value  of  each  machine.§ 

*  F.  M.  Burton,  F.S.A.A.,  "Commercial  Management  of  Engineering 
Works." 

t  "  Repairs,  Renewals,  Deterioration,  and  Depreciation  of  Workshop 
Plant  and  Machinery."  Paper  read  before  the  Institution  of  Mechanical 
Engineers,  by  James  Edward  Darbyshire. 

X  "System  in  Factory  Costs."     James  Rider. 

§  F.  D.  Leake,  "The  Question  of  Depreciation  and  the  Measure  of  Expired 
Outlay  on  Productive  Plant :  a  Plea  for  the  Study  and  Use  of  Better  Methods." 
Paper  read  before  the  Institute  of  Directors.  Leake's  "  Register  of  Industrial 
Plant  for  the  Measurement  of  Depreciation."     Good  &  Son. 


l6o  MACHINERY   USE. 

The  continuously  increasing  use  of  machinery,  and  the 
larger  ratio  the  cost  of  its  use  bears  to  the  total  cost  of 
production,  emphasises  the  desirability  first  advocated  in 
the  first  edition  of  this  book,  of  systematically  charging 
machinery  costs  over  the  processes,  or  articles  manufactured. 
The  problem  is  not,  as  has  been  said,  what  system  most 
fairly  charges  the  profits  of  successive  years,  with  the  bene- 
fits respectively  derived  by  these  years  from  the  use  and 
enjoyment  of  the  assets,  but  what  system  most  fairly 
charges  each  unit  of  product  with  the  proportionate  cost 
of  the  machinery  and  plant  expended  on  its  production. 

It  has  been  suggested  that  the  time  rate  for  each  machine 
should  be  based  on  the  assumption  that  it  is  being  worked 
continuously  to  its  full  capacity.  Thereby  the  advantage, 
or  the  disadvantage,  of  the  use  of  the  particular  machine 
relatively  to  manual  labour  or  other  machines,  the  effect  of 
insufficiency  of  orders  to  keep  the  plant  fully  employed,  will 
be  more  manifest,  and  the  extent  to  which  economies  in  pro- 
duction could  be  carried  under  other  circumstances  more 
clearly  shown.  As  machinery  is  often  not  continuously 
employed  to  its  maximum  extent  the  adoption  of  this  pro- 
cedure would  generally  entail  less  than  the  actual  lessened 
value  of  the  machinery  being  written  off  to  the  various  Stock 
or  other  orders  during  any  given  period.  The  further  sug- 
gestion has  therefore  been  made  that  the  balance  remaining 
on  each  plant  account,  being  the  difference  between  the 
amounts  charged  off  on  the  before  mentioned  assumption, 
and  the  actual  lessened  value  should  be  charged  off  by 
means  of  a  supplementary  rate  to  an  Idle  Capacity  account, 
as  representing  a  loss,  or  more  correctly,  a  non-realised  gain, 
consequent  upon  the  non-utilisation  of  the  plant  to  its  full 
capacity.  The  information  thus  obtained  would  be  of  great 
value  to  the  manufacturer  in  considering  how  he  can,  having 
regard  to  market  and  other  conditions,  realise  from  his  plant 


LIFE   BASIS.  l6l 

the  maximum  economic  advantage.  The  importance  of  this 
consideration  cannot  be  too  strongly  emphasised,  for  whilst 
in  the  case  of  labour  the  number  of  employees  directly 
engaged  in  production  can  be  regulated  from  time  to  time 
by  the  volume  of  trade,  such  readjustment  is  not  possible 
in  the  case  of  machines  whose  maintenance,  standing 
charges,  and  depreciation  have  to  be  provided  for,  whether 
idle  or  employed. 

Another  mode  of  dealing  with  machine  rates  is  to  fix  a 
normal  rate  per  hour  for  the  use  of  any  particular  machine, 
and  charge  the  stock  or  other  order  accordingly,  and  to 
adjust  these  results  from  time  to  time  by  means  of  an 
additional  rate  which  would  be  based  on  the  fluctuations  of 
trade,  and  the  abnormal  use  or  otherwise  of  the  machine. 
If  the  results  of  the  additional  rates  are  charged  off  to  the 
Stock  or  other  orders,  without  being  specially  noted,  it 
would  seem  that  so  good  a  measure  of  the  idle  capacity  of 
the  plant  would  not  be  obtained  as  by  the  procedure  before 
described.*  It  is  desirable  that  separate  rates  should  be 
fixed  for  the  Productive  Hour  and  the  Idle  Hour. 

This  system  of  charging  depreciation  on  the 

Cost  of  fuel.     ,..-\,,^^  ^,?  ^,,  ,, 

basis  or  the  Iiie  oi  a  machme  and  its  cost  would 
equally  apply  to  the  apportionment  of  the  cost  of  engines 
and  boilers  and  of  the  fuel  used  in  them.  The  total  number 
of  hours  the  machinery  is  running  will,  when  the  life  and 
cost  of  the  engines  and  boilers  have  been  ascertained, 
enable  working  orders  to  be  charged  with  their  proportion 
of  cost.  Similarly,  the  aggregate  number  of  hours  the 
machinery  is  in  use  being  known,  the  division  of  the  fuel 
account  for  that  period  by  this  number  will  give  the  cost  of 
fuel  per  hour  for  each  working  order, 

*  Interesting  data  on  the  matter  is  to  be  found  in  "  Factory  Accounting  as 
applied  to  Machine  Shops,"  Whitmore  ;  "Proper  Distribution  of  Expense 
Burden,"  A.  Hamilton  Church  ;  "Oncost,"  John  Mann,  jun.,  M.A.C.A. 

M 


i62  Machinery  use. 

The  continuously  increasing  use  of  electricity  as  a  motive 
power,  and  the  attachment  of  motors  to  individual  machines, 
permits  by  its  possible  subdivisions  of  cost,  a  much  greater 
accuracy  in  the  allocation  of  power  charges  than  is  practi- 
cable in  the  case  of  steam. 

When  depreciation  is  allocated  to  the  various  processes 
in  the  carrying  out  of  which  the  plant  has  been  deterio- 
rated, it  will  not,  of  course,  appear  as  a  separate 
profit  and  item  in  the  profit  and  loss  account,  but  will 
diminish  the  gross  profit  by  increasing  the  cost 
of  production  of  the  articles  manufactured,  instead  of  show- 
ing larger  gross  profit  only  to  be  reduced  by  a  general 
charge  for  depreciation,  as  is  the  case  when  a  lump  sum 
is  charged  to  profit  and  loss  account  in  respect  of  such 
depreciation. 

The   explanation    of  the    prime   cost   system    given   in 

Chapter   IV.  was  not  complicated   by  a  reference  to  the 

subject  of  machinery  use  and  depreciation,  which, 

Prime  cost  i  i    i  i  •  •       ^ 

and  dcprc-  at  that  Stage,  would  have  been  mconvenient ; 
but  no  difficulty  will  be  found  in  assimilating 
this  method  of  charging  for  the  use  of  machinery  with 
that  of  recording  cost  of  labour  and  stores  as  described 
in  that  chapter,  and  thus  ascertaining  cost  of  production. 

It  should  be  mentioned  that  there  are  items  in  the  books 
of  a  private  firm  or  joint-stock  company  to  which  no  general 
rule  of  writing  off  is  applicable.  Such  are  the  cost  of 
good-will,  patents,  trade  marks,  copyright  designs,  etc. ;  for 
Dcprccia-  although,  as  in  the  case  of  patents,  the  life  of 
w?ii,°^  ^°°*^'  the  asset  is  clearly  defined,  the  incidental  advan- 
patcnts,  etc.  j-^ggg  derived  from  the  possession  for  a  term 
of  years  of  a  valuable  monopoly  do  not  necessarily  cease 
upon  the  expiration  of  the  term  of  the  patent.  On  the 
contrary,  the  value  of  the  good-will  may  increase  although 
the  term  of  the  patent  is  expiring.     Whether  there  is  a 


GOODWILL.  163 

patent  or  not,  good-will  generally  increases  with  age  if 
profits  are  maintained,  or  are  expanding.  Assets  such 
as  these  should  be  considered  as  having  a  combination 
value,  differing  altogether  from  their  value  per  se.  The 
obvious  rule,  therefore,  is  that  in  the  balance-sheet  such 
assets  should  appear  at  their  cost  value,*  and  need  not 
be  written  down  unless  their  realisable  value  as  integral 
parts  of  a  going  concern  falls  below  their  cost  value. 
It  is  nevertheless  desirable  to  create  gradually  special 
reserve  funds  against  such  values  as  a  provision  against 
change  of  conditions.  Any  estimated  increment  may  be 
accounted  for  by  the  creation  of  a  special  fund,  as  explained 
on  p.  143,  but  until  such  estimated  increased  value  is 
realised  it  should  not  be  considered  as  an  element  of 
profit. 

A  different  set  of  considerations  apply,  however,  to  the 
writing  down  of  wasting  assets. 

In  some  cases,  such  as  timber  plantations,  where  the 
approximate  value  per  acre  of  the  timber  is  known,  it  is 
not  difficult  to  arrive  at  the  sum,  having  regard  to  the 
areas  in  the  plantations  in  which  the  trees  are  felled,  and 
the  cost  of  felling  in,  and  transporting  from  that  area  as 
compared  with  the  other  areas,  which  should  yearly  be 
debited  to  an  appropriate  Trading  Account,  and  credited 
to  the  account  making  provision  for  the  amortisation  of 
the  capital  originally  spent  on  the  plantation. 

*  The  Accountant  of  Dec.  6,  191 3,  contains  an  interesting  article  from 
an  American  correspondent  in  which  this  view  is  ably  criticised.  The  writer 
of  that  article  urges  that  Good-will  should  be  evaluated  for  the  Accounts  and 
Balance-Sheet  from  the  general  results  of  the  business  from  time  to  time.  In 
his  opinion  capital  is  a  derived  value  from  income  or  profits,  and  Good-will  in 
an  improving  business  may  be  debited  with  a  reasonable  additional  capitalisa- 
tion. He  adds,  "  Cost  does  not  make  value."  There  are  no  tangible  assets  in 
the  sense  used  by  accountants.  Values  represent  human  judgments :  they 
vary  as  judgments  vary  ;  at  best  they  are  perhaps  extremely  uncertain  things. 
If  this  be  true,  why  should  not  the  fact  be  frankly  recognised  in  accounting? 


164  MACHINERY   USE. 

In  the  case  of  mineral  ownerships  where  the  contents  of 
the  mine  cannot  be  ascertained,  or  of  oil  springs,  or  brine 
runs  where  the  extent  of  the  supply  is  not  known,  a 
reasonable  rule  would  seem  to  be  to  charge  revenue  on  the 
quantity  extracted  or  drawn  at  the  rates  of  royalty  usually 
charged  to  their  lessees  by  owners  of  such  properties  in  the 
district. 

Although  from  the  decisions  previously  quoted,  it  is 
apparently  not  legally  necessary  to  make  provision  for 
these  and  similar  wasting  assets,  profits  cannot,  from  an 
accountancy  point  of  view,  be  truly  ascertained  without 
such  provision  being  made. 


CHAPTER  VIII. 

STOCK. 

We  are  now  prepared  to  consider  the  final  stage  of  the 
book-keeping  appertaining  to  the  production  and  disposal 
of  commodities.  In  the  preceding  chapters  we 
have  endeavoured  to  show  as  comprehensively 
as  the  limits  of  this  treatise  admit,  the  manner  in  which 
the  multifarious  transactions  relating  to  the  expenditure  of 
labour  and  material  are  recorded  in  the  factory  books,  and 
how  those  books  assimilate  to  the  commercial  accounts  of 
a  manufacturing  business. 

In  the  second  chapter  we  have  dealt  with  the  employ- 
ment of  labour  and  the  payment  of  wages  ;  in  the  third, 
with  the  purchase  and  consumption  of  materials  or  stores  ; 
in  the  fourth,  with  the  prime  cost  of  the  manufactured 
article  called  stock  ;  in  the  fifth,  with  indirect  or  incidental 
expenses  and  their  allocation  ;  in  the  sixth,  with  the  rela- 
tion of  fixed  capital  to  cost ;  and  in  the  seventh,  with  the 
mode  of  charging  the  product  with  the  cost  of  the  provision 
and  use  of  machinery. 

In  this  chapter  we  propose  to  trace  the  records  which 

should  be  made  in  connection  with  the  realis- 

turedcom-     ation  or  distribution  of  the  manufactured  com- 

Foifr*ciasses  "lodities.    This  branch  of  our  subject  embraces, 

of  trans-         so  far  as  book-keeping  is  concerned,  four  dis- 
actions.  .  ,  ^ 

tmct  classes  of  transactions  : — 


1 66  STOCK. 

1st.  The  transfer  of  the  finished    article  called  stock 

from  the  factory  into  the  warehouse. 
2nd.  The  return  of  some  articles  from  the  warehouse 
to  the  factory  for  the  various  reasons  which 
will  be  mentioned. 
3rd.  The  sale  or  distribution  of  stock  or  manufactured 

articles. 
4th.  The  return  to  the  warehouse  of  stock  issued,  or 
of  stock  which  was  originally   sold,   but  has 
been  rejected  or  returned  by  the  purchaser. 
All  these  transactions  have  to  be  traced  into  both  the 
stock  books  and  the  commercial  books,  and  in  the  case  of 
the  sale  of  stock,  and  in  that  of  the  return  or  rejection  of 
the  stock  issued  or  sold  (the  third  and  fourth  classes  respec- 
tively), the  book-keeping   is  complicated  by  the  fact  that 
each  transaction  has  to  be  brought  into  the  Commercial 
Ledger  at  two  different  prices.     That  is  to  say,  when  an 
article  is  sold  it  is  taken  out  of  stock  at  the  price  at  which 
it  stands  in  the  Stock  Ledger,  and,  in  the  case 
for  same        of  an  absolutc  sale,  it  is  generally  invoiced  to  the 

article.  1   •    ,  •  a 

customer  at  a  higher  price.  As  a  consequence, 
a  sale  will  appear  in  the  Commercial  Ledger  to  the  debit  of 
a  customer,  and  to  the  credit  of  trading  account,  at  the 
invoice  price ;  whilst  by  a  corresponding  but  independent 
process  of  book-keeping,  the  same  transaction  will  appear  at 
a  lower  or  the  cost  price  to  the  credit  of  stock  account,  and 
to  the  debit  of  trading  account.  The  converse  will  be  the 
case  when  stock  is  taken  back  from  a  customer  and  sent 
into  the  warehouse,  the  price  at  which  it  is  credited  to  a 
customer's  account  not  generally  being  the  same  as  that  at 

which  it  is  debited  to  stock.  In  this  way  the 
stock  Books.  ,  •        1       T      1  1  1 

stock  account  in  the  Ledger  shows  the  aggre- 
gate cost  value  of  the  stock-in-trade  ;  the  personal  accounts, 


DISTRIBUTION   OF   COMMODITIES.  167 

the  amount  received,  or  to  be  received,  by  the  firm  in 
respect  of  the  goods  sold  ;  while  the  trading  account 
(which  is  debited  with  the  items  representing  the  value  of 
goods  issued  from  stock,  and  credited  with  the  sales  debited 
to  personal  accounts)  will  bring  out  the  difference  between 
the  cost  price  and  the  selling  price,  which  will  be  carried 
to  profit  and  loss  account,  as  the  gross  profit  or  loss.  This 
process  is  effected  by  entering  the  sales  in  two  separate 
books  corresponding  to  each  other,  the  one  dealing  with  the 
invoice  prices,  the  other  with  the  cost  prices,  and  likewise 
by  entering  the  stock  returned  to  warehouse  in  two  books 
which  perform  similar  functions  for  the  cancelled  sales. 
The  two  books  in  the  first  of  these  cases  would  be  respec- 
tively the  customary  Sales  Day  Book,  often  called  Invoices 
Outward,  containing  records  of  the  invoices  rendered,  and 
the  Sales  Analysis  Book,  containing  records  of  the  stock 
requisition  forms  (Specimen  No.  47)  for  stock  issued.  In 
the  case  of  the  return  of  stock  the  two  books  would  be 
respectively  the  Sales  Cancelled  Book,  containing  records  of 
the  credit  notes  sent  to  customers,  and  the  Stock  Returned 
by  Customers  Analysis  Book,  containing  records  of  the 
Stock  Returned  Debit  Notes  (Specimen  No.  48).  The 
advantage  of  carrying  out  the  suggestions  made  in  the 
introductory  chapter  as  to  distinguishing  books  by  their 
bindings  will  be  manifest  in  the  case  of  these  four  books. 
The  Stock  Issued  Book  and  the  Stock  Returned  Book  are 
kept  by  the  warehouseman,  whilst  the  corresponding  books, 
viz.,  the  Sale  Analysis  Book,  and  the  Sales  Cancelled 
Analysis  Book,  are  kept  in  the  counting-house. 

In  giving  titles  to  some  of  these  books  we  do  so  primarily 
Titles  of  with  the  desire  to  indicate  their  functions,  and, 
books.  ^3  already  stated,  the  forms  suggested  must  be 

taken  to  mark   the   transactions  which  it  is  necessary  to 


1 68  STOCK. 

register  rather  than  the  outlines  of  records  universally 
applicable. 

The  four  counting-house  books  are  posted  to  the  Ledger  ; 
the  Day  Book  individually  to  the  debit  of  personal  accounts, 
and  collectively,  by  means  of  the  Journal,  to 
of  stock  the  credit  of  trading  account  ;  the  Sales  or  Stock 
Commercial  Issued  Analysis  Book  to  the  credit  of  stock 
Ledger.  account  and  to  the  debit  of  trading  account ; 

the  Sales  Cancelled  Book,  the  converse  of  the  Day  Book, 
individually  to  the  credit  of  personal  accounts,  and  col- 
lectively to  the  debit  of  trading  account ;  and  the  Sales 
Cancelled  or  Stock  Returned  Analysis  Book,  being  the 
converse  of  the  Sales  Analysis  Book,  to  the  debit  of 
stock  account  and  to  the  credit  of  trading  account.  (See 
Diagram  IV.). 

We  can  now  proceed  to  a  detailed  examination  of  the 
book-keeping  relating  to  this  branch  of  our  subject. 

The  first  class  of  transactions  is,  as  before  stated,  the 
First  class  transfer  of  the  finished  article  from  the  factory 
of  trans-        to  the  warehouse.    The  form  by  means  of  which 

actions : 

Factory  to  this  transfer  is  effected  has  already  been  re- 
warehouse.    ^gj.j.g^  ^Q  ^g  ^^^  g^Q^^  j3^^j^  ^^^g  (Specimen 

No.  35). 

This  debit  note  is  entered  by  the  warehouseman  in  the 
stock  Re-  Stock  Received  Book  (Specimen  No.  36),  and 
ceived  Book,  posted  to  the  debit  of  the  Stock  Ledger. 

Upon  reaching  the  counting-house  the  Stock  Debit 
Note  is  entered  to  the  credit  of  the  Cost  Ledger,  as  ex- 
stock  Debit  plained  in  the  preceding  chapter,  and  the  total 
Note.  debits  to  stock,  in  respect  of  articles  finished, 

are  journalised  month  by  month  to  the  debit  of  stock 
account  in  the  Commercial  Ledger 


DISTRIBUTION    OF   COMMODITIES.  169 

With  regard  to  the  return  of  articles  from  the  ware- 
house to  the  factory,  which   constitutes    the  second   class 

,   ,       of  entries,  it  may  be  remarked  that  although 
Second  class  '  -'  ° 

of  transac-     the  articles  made  for  stock  may  all  have  been 

tious:  Ware-  .  ,  ,  1  1 

bouse  to         manufactured    under   the  personal   supervision 

factory.         ^^  those  who  will  more  or   less  be  connected 

with  their  sale,  and  questions  as  to  the  rejection  of  goods 

are  not  likely  to  be  nearly  as  numerous  as  if  the  articles 

Rejected        had  been  made  by  an  outside  contractor,  still 

stock.  ^j^g  question  of  the   return  to   the  factory   of 

finished    articles    may   arise    either    on    account    of   bad 

workmanship  or  alteration  of  design,  and  must  be  provided 

for   in    the   book-keeping.     In    all    such  cases  it   will   be 

desirable  to  send  into  the  store,  at  the  time  the  finished 

article  is  refused  as  stock,  a   Transfer    Note   (warehouse 

debit  to  store). 

In  Specimen  No.  42  this  Transfer  Note  is  shown  with  a 
counterfoil ;  but  a  duplicate,  by  means  of  carbonised  paper, 
can  be  substituted. 

The  articles  rejected  as  stock  having  been  sent  into 
store,  it  remains  to  be  determined  what  alterations,  if  any, 
are  to  be  made.  Should  further  labour  or  material  be 
required  to  be  expended,  a  new^  stock  order  will  be  issued, 
and  the  recording  of  the  expenditure  will  follow  the  routine 
laid  down  for  the  manufacture  of  commodities. 

The  adjustments  as  between  warehouse  and  store  are 

best    recorded    by    the    warehouseman    and    storekeeper 

entering  the  transfer  notes  in  a  Transfer  Book. 
Transfer  ° 

Books  and     The  warehouseman  will,  of  course,  enter  on  the 

I^0^6S  

credit  side  of  his  Transfer  Book  the  credits 
to  his  stock  for  the  finished  articles  forwarded  by  him  to 
the  store.  On  the  debit  side  of  his  Transfer  Book  he 
will    enter   the    debit    notes    received    by    him    from    the 


I/O 


STOCK. 


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TRANSFERS   BETWEEN    STORE   AND   WAREHOUSE.      I/I 

Storekeeper  for  articles  transferred  from  store  to  warehouse. 
The  latter  class  of  entries  arise  out  of  transactions  of  a 
Retail  trans-  retail  character,  not  always  carried  on  in  con- 
actions,  nection  with  a  manufacturing  concern  ;  but  the 
concluding  part  of  this  chapter  will  be  devoted  to  its 
consideration. 

With  regard  to  the  Transfer  Books,  the  entries  made 
by  the  storekeeper  will,  naturally,  be  the  converse  of  those 
made  by  the  warehouseman,  and  the  store  will  be  credited 
with  all  articles  forwarded  to,  and  debited  with  all  articles 
received  from,  the  warehouse.  The  two  Transfer  Books 
will  therefore  always  balance.  It  will  be  necessary  to  post 
the  items  in  the  Transfer  Books  to  the  Stores  and  Stock 
Ledgers  respectively,  so  as  to  bring  out  the  correct  balances, 
not  only  as  between  these  Factory  Ledgers  in  the  aggre- 
gate, but  also  as  between  the  individual  Stores  and  Stock 
Ledger  accounts. 

The  specimen  ruling  of  the  Store  Transfer  Book  (No.  43) 
will,  with  necessary  alteration  of  headings,  apply  equally  to 
the  Warehouse  Transfer  Book  of  which  it  is  the  counterpart. 

Whilst  we  think  it  necessary  to  state  in  full  detail  the 
principles  to  be  remembered  in  dealing  with  these  transfers, 
it  must  in  any  individual  case  be  left  to  the  accountant 
to  determine  whether  the  circumstances  of  any  particular 
business  admit  of  the  functions  of  the  two  Transfer  Books 
being  adequately  performed  by  one  book. 

The  transfer  notes  between  store  and  warehouse,  and 
vice  versa,  can,  if  the  nature  and  extent  of  the  trans- 
actions warrant  it,  when  forwarded  to  the  counting-house, 
be  entered  in  a  Transfer  Analysis  Book,  and  the  Journal 
entry  for  the  commercial  books  be  based  on  the  amounts 
so  arrived  at ;  or,  if  the  transactions  are  few  they  can  be 
recorded  from  the  Transfer  Notes  into  the  Journal  direct. 


1/2 


STOCK. 


ORDERS  RECEIVED  BOOK,— Specimen  No.  44. 


1I 
^0 

6 
Z 

u 

0 

\.  6 

is 

60 

l-i 

0 

Nature 

of 
Order. 

0^ 

•6 

Q  » 
3 

rt.H 

c 

Remarks. 

Enter  in  this  column  route 

by  which  goods  are  to  be 

sent,  also  marks  for   cases, 

and  any  special  instruction. 

The  book-keeping  in  relation  to  the  sale  of  commodities 
may  be  said  to  be  initiated  by  the  receipt  of  an  order,  and 
Sale  of  com-  ^s  regards  the  factory,  will  hold  good  whether 
modities.  received  direct  from  a  customer  or  through  an 
agent.  The  questions  of  discount  or  commission  which 
present  themselves  in  the  latter  case  are  transactions  which 
it  is  necessary  to  deal  with  in  the  commercial  books  only. 
The  principal  of  the  firm,  if  he  accepts  the  order,  when  it 


Specimen  No.  45. 
Stock  Requisition  and  Advice  to  Warehouseman- 


19 


-No. 


Please  forward  the  undermen- 
tioned Articles  to at 

per Marking  Cases 


Customer's  Order  No.  or  Reference- 
Stock  Requisition  Book,  fol. 

Sales  Analysis  Book,  fol. 


Article,  with  Full  Description. 

No. 

Weight. 

(ii 

rt 

E 

c 
0 
H 

1 

O- 

.a 

Amount. 

Ready  for  dispatch 19 

Warehouseman. 

Approved 

STOCK   ISSUES.  173 

is  found  to  be  in  proper  form  with  regard  to  price,  terms 
of  payment,  drawings  or  specification,  date  of  delivery, 
penalties  (if  any)  as  to  time  of  completion,  cost  of  carriage, 
and  mode  of  delivery,  will  probably  initial  it  by  way  of 
authorising  its  execution.  Should  the  stock  of  the  com- 
modities ordered  be  exhausted,  or  should  the  articles  require 
to  be  specially  manufactured,  an  order  to  manufacture  the 
given  or  a  larger  number  of  similar  articles  for  stock,  should 
be  passed  concurrently  with  the  acceptance  of  the  order  as 
already  explained. 

The  customer's  order  having  been  accepted  may  be 
registered  in  an  Orders  Received  Book  (Specimen  No.  44). 
Orders  Re-  The  order  may  then  be  passed  on  for  execution 
ceived  Book,  ^-q  ^j^g  warehouseman,  who  should  have  received 
a  standing  instruction  to  return  all  orders  to  the  counting- 
house  when  completed.  If  it  be  thought  unadvisable  to 
pass  the  original  order  (which  may  contain  references  to 
the  terms  of  payment,  commission,  or  discount, 

Adviceto  ^  ,  ^   \  ,  '  .  , 

warehouse-  etc.)  to  the  warehouseman,  he  may  be  provided 
with  a  copy  or  with  extracts  from  the  Orders 
Received  Book,  or  a  special  form  of  advice  may  be  sent  to 
him.  The  advice  may  take  the  form  shown  in  Specimen 
No.  45. 

The  form  could  also  be  made  to  serve  the  warehouse- 
man as  a  Stock  Requisition,  and  it  would,  in  that  case, 
stock  Issued  be  entered  in  the  Stock  Issued  Book.  In  cases 
Book.  in   which  the   goods   are   ready  for    shipment, 

and  further  instructions  have  to  be  given  concerning  them, 
the  form  would  be  sent  to  the  counting-house,  and  if  the 
dispatch  of  the  goods  be  approved,  the  requisition  could 
be  returned  to  the  warehouseman  with  the  information 
inserted  thereon.  It  is  necessary  to  follow  this  routine  if, 
as  is  sometimes  the  case,  it  is  not  possible  for  the  customer 


174 


STOCK. 


to  give  complete  instructions  as  to  forwarding  when  placing 
the  order,  or  if  special  arrangements  as  to  payment  before, 
or  on,  delivery  have  to  be  made. 

In  some  cases  it  is  desirable  to  supplement  the  Stock 
Requisition  by  a  "  Forwarding  Note,"  issued  on  the  request 
of  the  warehouseman.  This  note  not  only  gives  the  ware- 
houseman the  final  instructions  as  to  shipment,  but  also 
attaches  to  the  signatory  the  responsibility  for  seeing  that 
the  final  tests  or  examinations  of  the  apparatus  have 
been  made. 


STOCK  ISSUED  BOOK.— Specimen  No.  46. 


Date. 

Sale 

Order 

No. 

Article. 

No. 

Weight. 

Price. 

1 

Ledger 
Fol. 

J3 

Amount.     1 

Should  the  original  order  be  sent  to  the  warehouseman 
the  stock  may  be  drawn  from  the  warehouse,  according 
stock  Re-  to  the  conditions  of  the  business,  either  by 
quisitions.  posting  the  order  direct  to  a  Stock  Issued  Book 
(Specimen  No.  46),  or  by  means  of  a  Requisition  Form 
(Specimen  No.  47). 

The  requisition  would  likewise  require  posting  in  the 
Stock  Issued  Book.  In  this  case  that  book  would  require, 
for  purposes  of  reference,  an  additional  column  for  the 
No.  of  the  Stock  Requisition.  The  Stock  Issued  Book 
will  of  course  in  turn  be  posted  to  the  credit  side  of  the 
Stock  Ledger. 


STOCK    REQUISITIONS.  I75 

Where   there   is   great  variety  in    the   articles  sold,  or 

multiplicity  of  transactions,  it  may  be  desirable  that  the 

^  ..  counting-house    should    be    kept    regularly    in- 

Daily  return  °  ,  r-  t>  / 

of  stock  formed  of  the  stock  issued  each  day.  This 
can  be  done  either  by  alternate  Stock  Issued 
Books  being  kept,  so  that  the  previous  day's  record  of 
stock  issued  may  be  always  at  the  counting-house  and  the 
current  day's  record  in  the  warehouse  ;  or  the  warehouse- 
man may  send  in  every  morning  a  Stock  Sent  Away  Form, 
showing  all  stock  that  has  been  issued  during  the  previous 
day,  giving  in  each  case  the  Order  No.,  so  that  the  clerk 
invoicing  may  immediately  turn  to  the  Orders  Received 
Book  and  see  the  stipulations  and  conditions  on  which  the 
order  was  accepted. 

It  is  also  desirable  that  the  amount  of  the  stock  re- 
quisitions should,  in  the  counting-house,  be  entered  and 
stock  Issued  analysed  in  a  Stock  Issued  or  Sales  Analysis 
A^afysis  ^ook.  This  book  (of  which  we  do  not  give 
Book.  a  specimen  ruling,  as  it  pertains  to  the  count- 

ing-house) should  be  so  ruled  that  the  various  items 
entered  from  the  Stock  Requisitions  may  be  analysed 
under  the  various  branches  of  the  business.  The  agcrre- 
gates  of  the  totals  of  such  branches  would  necessarily 
agree  for  any  given  period  with  the  totals  of  the  stock 
requisitions  for  the  same  period,  and  necessarily  also 
with  the  totals  of  the  warehouseman's  Stock  Issued 
Book. 

The  fourth  class  of  transactions  referred  to  at  the  out- 

^  _^^  ,  set  of  this  chapter  involves  the  procedure  to  be 
Fourth  dass  ^  ^ 

of  trans-        adopted  in  the   factory  with    regard    to    stock 
stock  back     which  is  rejected  or  returned,  after  having  been 
houser^'         ^^"^   °^*  ^^^  inspection  or   approval,   on   loan, 
hire,  or  exhibition. 


176 


STOCK. 


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SALES  ANALYSES. 


177 


The  warehouseman  on  receipt  of  such  goods 
Returned  will  make  out  a  Stock  Returned  Debit  Note 
Debit  Note.    (Specimen  No.  48). 

These  Stock  Debit  Notes   will   be  duly  entered    in    a 
stock  Re-       Stock    Returned   by    Customers    Book  (Speci- 

turnedby      j^gj^  ]^q    .q\   ^hich  will  be  posted  to  the  debit 
Customers  ^^^'  '^ 

Book.  side  of  the  Stock  Ledger. 


STOCK  RETURNED  BY  CUSTOMERS  BOOK.— Specimen  No.  49. 


Stock 
Debit 
Note. 

Article. 

Sale 

Order 

No. 

6 

Weight. 

1 

S2 

1-1 

In   the   office   the    Stock    Returned    Debit    Notes   are 

entered  and  analysed  in  a  Stock  Returned  by  Customers 

Analysis  Book,  which  is  the  converse  of  the 

turned  Ana-    Sales  Analysis  Book  already  referred  to.     As 

lysis  Book.  .  .     ,  m  -i-  r 

an  mstance  ot  the  possibility  of  concentrating 
the  books  while  adhering  to  the  principle  laid  down,  it  is 

well  to  mention  that  in  an  establishment  where 
tion  of  there   is    little  variety  in   the  articles  sold,  or 

where  the  sales  are  not  numerous,  the  Stock 
Requisition  might  form  the  basis  on  which  goods  are  in- 
voiced from  the  office.  In  such  cases  the  Sales,  or  Day 
Book  (debit  to  customers),  should  be  provided  with  a 
column  in  which  the  stock  price  of  the  article  as  shown  on 
the  requisitions  could  be  entered  against  the  respective 
invoices.  It  would  thus  be  possible  by  the  mere  process 
of  addition  to  ascertain  the  total  amount  of  the  invoices 

N 


178  STOCK. 

rendered,  and  the  value  at  stock  prices  of  the  articles  so 
invoiced,  thus  obviating  the  need  for  a  Stock  Issued  (or 
Sales)  Analysis  Book. 

Equally  the  Stock  Returned  Debit  Note  for  goods 
returned  by  customers  might  be  treated  as  the  basis  for 
the  credit  note  to  the  customer,  and  the  Sales  Cancelled 
Book  (credit  to  customers)  might  be  so  ruled  as  to  show 
the  invoicing,  as  well  as  the  cost  rates  of  the  stock 
invoiced  and  returned,  thus  obviating  the  need  for  a 
Stock  Returned  Analysis  Book.  This  concentration  of 
books  does  not  prevent  an  analysis  being  made  under 
departmental  or  other  heads,  either  of  the  invoices  or 
credit  notes,  or  of  the  corresponding  stock  requisition  or 
stock  debit  notes.  The  issuing  of  credit  notes  for  allow- 
ances made  by  the  principals  either  on  account  of  defects 
in  the  articles  supplied,  or  for  other  reasons,  is  not  dealt 
with  in  detail,  such  issue  and  record  being  usually  a 
matter  of  office  routine. 

In  the  case  of  articles  sent  out  for  inspection,  on  approval, 
consignment,  sale  or  return,  or  loan,  it  is  very  desirable 
^     .  that  while  a  pro  forma  invoice,  at  the  normal 

Goods  on  -•  -" 

loan.  selling    price,    should    accompany    them,   the 

articles  should,  until  an  order  is  received  or  a  definite  sale 
effected,  be  dealt  with  in  the  Sales  or  Day  Book  at  their  stock 
prices  as  the  invoicing  rates.  We  cannot  too  strongly  insist 
on  the  great  disadvantage  of  treating  loaned  goods  in  any 
other  way.  The  system  of  showing  book  profit  on  these 
transactions  is  most  fallacious,  and  so  misleading  that 
it  cannot  be  resorted  to  extensively,  or  for  any  length 
of  time,  without  causing  serious  embarrassment.  It  is 
evident  that  the  stock  loaned  is  not  likely  to  be  always 
uniform  in  character,  quantity,  or  value,  and  that  if  treated 
in  precisely  the  same  way  as  goods   sold   the  profit  and 


CONSIGNMENT  OF   BOOKS.  1 79 

loss  account  for  any  period  is  unduly  increased  at  the 
expense  of  other  periods.  In  addition,  the  profits  are  not 
realisable  until  the  sale  is  made.  Articles  sent  to  branch 
establishments  necessarily  follow  this  rule  also.  At  each 
balancing  period,  therefore,  the  Returns  Book  should  be 
specially  examined  to  see  that  allowances  for  all  returns 
are  properly  brought  into  account.  In  some  cases  these 
transactions  are  ultimately  recorded  in  special  books, 
known  as  "  On  Approval  "  or  "  Consignment  "  Ledgers. 

It  will  be  manifest  that  the  entries  in  the  Stock  Ledgers 
consist  of  debits  for  stock  received  from  the  factory  and  for 
Recapituia-  stock  returned  from  customers,  and  of  credits 
tion.  fQj.   stock  sold  to  customers  and   stock  trans- 

ferred to  store  and  that  the  balances  under  the  various 
headings  will  show  the  number  and  the  value  of  the 
various  articles  on  hand,  and  the  aggregate  of  such 
balances  the  total  value  of  the  stock,  which  should  of 
course  agree  with  the  total  value  shown  by  the  Commercial 
Ledger,  and  with  the  results  of  the  surveys. 

It  will  also  be  obvious  that,  as  regards  the  office,  the 
various  items  in  the  Day  Book  and  the  Sales  Cancelled 
Book  being  posted  to  the  debit  and  credit  of  the  various 
purchasers  respectively,  the  sum  of  such  items  will  in  the 
case  of  the  Day  Book  give  the  total  credit  to  trading 
account  for  invoices  rendered,  and  in  the  case  of  the  Sales 
Cancelled  Book  the  debit  to  trading  account  for  stock 
returned  by  customers. 

The  total  of  the  Sales  Analysis  Book  gives  the  amount 
which  through  the  Journal  is  debited  to  trading  account 
and  credited  to  stock,  and  the  total  of  the  Stock  Returned 
by  Customers  Analysis  Book  gives  the  amount  which 
through  the  Journal  is  debited  to  stock  and  credited  to 
trading  account. 


l80  STOCK. 

When  these  entries  have  been  made  the  trading  account 
will  show  with  absolute  exactness  the  gross  profit  realised, 
and  the  balance  of  the  stock  account  (after  journalising 
the  debits  to  stores  and  credits  to  stock  on  account  of 
transfers)  will  be  the  value  of  the  stock  ready  for  sale. 
The  relation  of  these  various  transactions  one  to  another 
will  be  made  manifest  by  Diagrams  IV.  and  V.  In  practice 
an  account  in  the  Stores  Ledger  may  be  the  record  of  an 
article  or  a  group  or  articles,  as  may  be  found  the  more 
convenient  for  the  purposes  of  the  business,  and  the 
methods,  as  previously  described,  of  economising  detail 
in  the  Stores  Ledger  are  equally  applicable  in  the  case  of 
the  Stock  Ledger. 

In  an  earlier  part  of  this  chapter  we  alluded  to  the  pos- 
sible combination  of  a  manufacturer  not  only  distributing 
Further  the  commodities  he  manufactured,  but  also, 
"*tafi  trans-  ^"  exceptional  cases,  acting  as  a  retailer  of 
actions.         goods  produced  by  others. 

It  must  not  be  overlooked  that  there  is  a  fundamental 
distinction  in  these  transactions.  If  a  manufacturer  acts 
to  any  extent  as  a  retailer,  it  will  be  well  to  draw  a  clear 
line  of  demarcation  between  his  two  branches  of  business.- 
In  the  retail  branch,  which  is  an  ordinary  buying  and  sell- 
ing, and  not  a  manufacturing,  business,  the  book-keeping 
Retail  is   such   as    properly  pertains    to   the   general 

warehouse,  office.  In  an  extensive  business  where  this 
combination  obtains,  it  may  be  desirable  to  establish  a 
separate  retail  warehouse  as  distinguished  from  the  ware- 
house which  is  the  repository  of  the  manufactured  stock. 

If,  however,  the  retail  transactions  are  exceptional,  and 
their  volume  does  not  warrant  in  practice  any  absolute 
division  from  the  manufacturing  portion  of  the  business, 
the  articles  which  are  bought  merely  for  resale,  and  on 


RETAIL   TRANSACTIONS.  l8l 

which  neither  time  nor  material  are  expended  in  the 
factory,  can  be  dealt  with  either  as  stores,  or  preferably, 
as  stock. 

If  they  are  dealt  with  as  stores,  the  procedure  followed 
is  that  described  in  Chapter  III.  for  the  receipt  and  with- 
store  drawal  of  material,  save  that  the  store  warrants 

method.  f^j.  articles  withdrawn  for  sale,  when  they  reach 
the  general  office,  should  be  entered  in  a  Stores  Sold 
Analysis  Book,  the  items  in  that  book  being  posted  to  the 
debit  of  a  stores  sold,  retail  trading,  or  other  similar 
account  in  the  Commercial  Ledger,  the  credit  to  that 
account  being  the  total  of  the  invoices  rendered  to  cus- 
tomers for  goods  retailed,  and  the  balance  representing 
the  gross  profit  or  loss  on  that  branch  of  the  business. 

If  articles  for  retailing  be  treated  as  stock,  the  invoices 
from  the  vendors  can  be  passed  to  the  warehouseman,  the 
stock  procedure  being  similar   to   that    for   invoices 

method.  ^^j.  s|;Qj-es   purchased,  which  is  fully  described 

in  Chapter  III.  In  this  case  the  invoices  would  be  debited 
in  the  general  office  to  stock  account  ;  and  the  with- 
drawal of  the  articles  from  the  warehouse  would  entail  a 
credit  to  the  same  account,  and  a  debit  to  a  retail  trading 
account ;  this  latter  account  being  credited  with  the  value 
of  the  invoices  rendered  to  customers.  So  far  as  the 
factory  is  concerned,  the  invoice  for  goods  purchased 
would  pass  through  the  Stock  Received  Book  (Specimen 
No.  36)  into  the  Stock  Ledger,  and  the  Stock  Requisition 
(Specimen  No.  47)  would  pass  into  the  same  ledger 
through  the  Stock  Issued  Book  (Specimen  No.  46). 

An  equally  effective  and  probably  more  simple  method 
would  be  to  pass  all  such  exceptional  items  from  store  into 
stock  by  means  of  the  Transfer  Book  (Specimen  No.  43). 
By  these  means  all  invoices  for  goods  purchased  would  pass 
through  the  commercial  books  to  the  debit  of  one  account, 


1 82  STOCK. 

namely,  that  of  stores,  and  conversely  all  invoices  for  goods 
sold  would  pass  through  the  same  books  to  the  credit  of  the 
trading  account,  the  debit  to  this  account  arising  from  the 
stock  value  of  the  goods. 

We  have  already  referred  to  the  desirability  of  localising 
the  cost  of  articles,  and  shown  that  the  cost  of  parts  of 
articles  can  be  ascertained  by  following  the  routine  de- 
scribed, but  in  concluding  this  chapter  it  will  be  well  to 
refer  briefly  to  those  cases  in  which  parts  complete  in  them- 
selves but  subsidiary  to  the  manufacture  of  other  articles, 
are  produced  in  greater  quantity  than  is  required  for  the 
manufacture  of  the  articles  of  which  they  form  part.  This 
increased  production  maybe  due  to  certain  parts  being  of  a 
more  permanent  type  than  others  and  added  to  stock  with 
less  risk  of  obsolescence,  to  their  greater  production  at  one 
time  cheapening  the  cost,  to  their  being  parts  which  may 
be  required  for  renewals  or  repairs,  to  there  being  a  dearth 
of  work  in  any  particular  branch  of  the  factory,  or  to  other 
special  causes. 

Whatever  be  the  reason  for  their  production,  all  expendi- 
ture on  them  should  be  recorded  as  in  the  case  of  a  manu- 
facturing or  stock  order,  and  the  routine  described  in  the 
chapter  on  stores  should  be  followed.  As  the  parts  made 
in  excess  of  the  number  required  for  the  manufacture  of 
the  finished  article  will  all  have  been  charged  to  stock  by 
means  of  the  Stock  Debit  Note,  those  intended  for  sale 
will  remain  in  the  warehouse  and  be  duly  recorded  in  the 
Stock  Books,  while  those  parts  intended  for  future  use  in 
manufacture  will  require  to  be  transferred  to  the  store  by 
means  of  the  Transfer  Books,  and  will  be  drawn  out  of 
store  by  means  of  Stores  Warrants  like  all  other  material 
required  for  manufacture. 

Diagram  V.  gives  a  view  of  the  books  and  forms  referred 
to  in  this  chapter,  and  their  relation  to  each  other. 


CHAPTER  IX. 

SURVEYS. 

The  most  obvious  utility  of  the  Stores  and  Stock  Ledgers, 
kept  in  the  manner  described  in  the  preceding  chapters,  is 
utility  of  that  by  their  means  the  store-keeper,  warehouse- 
stock^"*  man,  and  others  concerned,  are  able  to  ascertain 
Ledgers.  what  is  the  quantity  of  any  particular  commodity 
on  hand  at  any  given  time,  without  the  delay  and  expense 
involved  in  the  process  generally  known  as  "  taking  stock." 
The  ability  to  obtain  this  information  in  an  accurate  and 
speedy  manner  has  a  very  wide  and  important  bearing  upon 
the  general  accounts  of  the  firm.  Unless  it  is  at  command 
it  is  impossible,  in  undertakings  of  any  magnitude,  to  deter- 
mine, even  approximately,  until  a  survey  has  been  made, 
what  is  the  result  of  the  business.  It  is  claimed  for  the 
system  of  accounts  we  have  explained  in  these  pages,  that 
one  of  its  chief  advantages  lies  in  the  fact  that  it  obviates  the 
necessity  of  taking  stock  simply  for  the  purpose  of  drawing 
stock-  up  a  balance-sheet.     Theeconomic  value  of  this 

^J^g°^  advantage  to  principalswhose  business  is  liable  to 
sheet.  many  vicissitudes,  can  scarcely  be  overrated,  for 

it  removes  one  of  the  most  powerful  obstacles  to  the  frequent 
closing  of  the  books  and  ascertainment  of  the  results  of  the 
business.     There  is  no  doubt  that  balance-sheets  would  be 


1 84  SURVEYS. 

made  up  much  more  frequently  than  is  usually  the  case,  if  it 
were  not  for  a  survey  being  a  very  troublesome  and  ex- 
pensive matter,  and  that  proprietors  would  be  kept  more 
fully  ail  coiirant  with  the  tendency  of  their  business  than 
can  be  the  case  when  the  books  are  closed  only  at  long 
intervals  of  time.  Under  the  methods  of  book-keeping 
here  advocated,  a  survey  would  simply  serve  the  purpose 
of  substantiating  the  results  deduced  from  the  books  of 
account,  and  it  is  this  feature  which,  perhaps  more  than 
any  other,  distinguishes  a  proper  system  of  Factory 
ManyFac-  Accounts  from  the  methods  generally  adopted. 
counts^'mere  Factory  books,  when  kept,  are  often  for  the 
memoranda,  most  part  of  the  nature  of  memoranda,  being 
simply  methods  of  book-keeping  by  single  entry,  and 
lacking  both  coherence  and  continuity,  inasmuch  as  they 
are  merely  disconnected  entries,  which  can  be  verified  and 
assimilated  only  by  means  of  the  periodical  surveys.* 

Unless  Stores  and  Stock  Ledgers  are  kept  in  some  such 
way  as  described,  it  is  imperative  that  the  survey  of  all 
articles,  if  it  is  to  answer  any  useful  purpose,  should  be  made 
at  one  time,  for,  in  the  absence  of  factory  books,  the  only 

comparison  of  which   the  result  of  the  survey 
Survey  and         ,...,,  ,        r    i  ,  \ 

Commercial   admits  IS  With  the  totals  of  the  stores  and  stock 

^^^'  accounts  of  the  Commercial  Ledger  ;  but  even 

this  comparison  can  be  one  of  book  values  only,  and  not 

of  quantities  or  measurements,  and  an  effective  verification 

of  the  details  of  the  survey  is  altogether  out  of  the  question- 

*  "  Cost  accounts  which  do  not  at  any  time  come  into  agreement  with  the 
Commercial  Accounts,  and  are  not  subject  to  those  continuous  checks  which 
safeguard  the  accuracy  of  the  Commercial  Accounts,  cannot  at  their  best  be 
much  more  than  cost  memoranda,  with  more  or  less  uncertainty  as  to  the 
results  obtained,  according  to  the  conditions  under  which  they  are  operated." — 
"  Manufacturing  Cost."  Paper  read  before  the  Ontario  Institute  of  Chartered 
Accountants,  May  15,  1905,  by  W.  H.  P.  Anderson,  C.A. 


GENERAL   STOCK-TAKING.  1 85 

If  the  survey  is  simultaneous  it  is  necessary  either  to  sus- 
pend for  the  time  the  issue  and  receipt  of  materials,  or  to 

make  subsequent  additions  and  subtractions  in 
Surveys  and  ^ 

disorgani-  respect  of  materials  received  or  issued  during 
the  period  of  stock-taking.  Disorganisation 
generally  ensues  during  this  period,  and  to  such  an  extent 
is  this  the  case  that  it  is  often  found  necessary  and  con- 
venient to  suspend  business  while  the  process  is  going  on. 
While  pointing  out  the  inconveniences  attending  periodical 
and  simultaneous  surveys  of  all  properties,  we  do  not  wish 
to  detract  from  their  importance  upon  special  occasions, 
when  for  some  reason  the  verification  of  the  balances  of 
the  Stores  and  Stock  Ledgers  may  be  required. 

The  existence  of  the  Stock  and  Stores  Ledgers  enables 
surveys  to  be  taken  by  degrees,  and  at  times  when 
Surveys  by  ^^^  State  of  business  is  such  as  to  minimise 
degrees.  ^.j^g  disorganisation  and  attendant  loss  of 
profit.  Precautions  would  have  to  be  taken  in  cases  in 
which  a  simultaneous  stock  taking  or  survey  never  took 
place,  that  stores  or  stock  were  not  transferred  from  one 
place  or  department  to  another  so  as  to  do  duty  in  more 
than  one  capacity.  There  is  reason  to  believe  that  store- 
keepers and  warehousemen  would  be  more  vigilant  if  they 
knew  that,  instead  of  a  periodical  survey,  an  inventory  of 
any  of  their  stores  or  stock  might  be  called  for  at  any  time 
and  without  warning,  and  that  they  would  be  required  to 
explain  any  differences  between  the  Survey  and  the 
Ledger  accounts.  A  further  advantage  of  the  Stores  and 
Stock  Ledgers  is,,  that  by  their  means  any  excess  or 
deficiency  of  commodities  shown  by  the  surveys  can  be 
localised  and  easily  traced. 

It  is  to  be  regretted  that  there  does  not  seem  to  be  in 
practice  any  absolute  standard  of  efificiency  in  regard  to 


1 86  SURVEYS. 

stock-taking,  and  that  the  term  is  often  applied  to  a  super- 
ficial review  of  the  articles,  and  to  an  estimate  of  what 
Standard  oi  ^^'  ^^y  worse  Still,  to  a  guess  at  what  should  be, 
efhciency.  ^^q  value.  In  an  efficient  survey  every  record 
should  be  based  on  "  handling,"  and  nothing  should  be 
estimated  or  taken  for  granted,  while  the  pricing  of 
the  articles  should  be  based  on  principles  which  will  be 
hereafter  referred  to.  In  the  case  of  large  bulk  stocks 
such  as  coal,  pig-iron,  ore,  and  similar  supplies,  if  their 
weight  is  not  ascertained  by  measurement  it  is  often  a 
considerable  time  before  the  stocks  are  sufficiently  reduced 
to  enable  an  inventory  to  be  taken  by  means  of  lifting  and 
weighing,  but  if  a  small  extra  percentage  is  added  to  the 
consumption  to  save  waste,  the  survey  generally  verifies 
the  book  figures.  In  the  case  of  stocks  in  which  moisture 
is  inherent,  and  for  which  varying  allowances  have  to  be 
made  according  to  the  different  stages  of  drying,  and  the 
season  of  the  year,  the  condition  of  the  stock  at  the  time 
the  survey  is  made  has  to  be  noted  and  allowed  for. 

The  work  of  a  survey  can  in  practice  often  be  organised 
best  by  one  person  well  acquainted  with  the  goods 
calling  out  their  description  and  quantity  to  another 
who  enters  them  on  the  survey  sheets.  The  pricing  of 
the  sheets  being  undertaken  by  a  third  who  obtains  his 
data  from  the  tabs,  or  card  or  other  tickets  on  the  bins, 
racks,  or  other  store  receptacles,  or  from  other  sources, 
the  calculations  and  costs  and  the  checkings  thereof  being 
done  by  the  accountancy  staff.  In  practice  the  bin  cards 
are  very  serviceable  in  preventing  overstocking  or  running 
out  of  stock.  The  stocks  should  be  taken  on  sheets  or 
pages  numbered  consecutively  for  each  class  of  stock,  with 
corresponding  adhesive  labels  for  attachment  to  the 
articles  or  the  receptacles  containing  them.  To  minimise 
discrepancies,  it  is  desirable  that  when  a  general  survey 


SURVEY  SUMMARIES.  1 87 

is  being  made,  suppliers  of  goods  should  be  notified  thereof, 
and  asked  to  send  special  statements  of  account  for  all 
goods  received  by  the  purchasers  prior  to  the  date  of  stock- 
taking, for  which  payment  had  not  been  made.  Goods 
which  are  held  on  the  basis  of  agency  or  consignment 
should  be  separately  scheduled,  and  the  survey  results 
compared  with  the  special  accounts  in  the  Ledgers  record- 
ing these  transactions. 

The  results  of  the  survey  should  be  epitomised  on  survey 
sheets,  of  which  Specimen  No.  50  shows  a  ruling  that  will 
be  applicable  to  most  trades.  These  sheets  should  be  so 
arranged  as  to  admit  of  comparison  with  the  corresponding 
accounts  in  the  Ledgers. 

If  the  system  suggested  in  these  pages  be  adopted,  the 
result  of  the  surveys  would  show  an  agreement 
of  survey  between  the  number  and  weights  or  measure- 
ments of  the  articles  according  to  the  inventories 
and  those  standing  as  balances  in  the  Ledger,  and  also 
between  the  aggregate  money  value  of  the  articles  and  the 
balances  of  the  respective  accounts  in  the  Commercial 
Ledger.  It  is  desirable  that  the  Ledger  Balance  and  the 
Survey  Sheets  totals  should  be  tabulated  for  comparison  in 
detail,  so  that  excess  or  deficiency  in  any  particular  item 
may  be  noted,  and  any  undue  discrepancy  in  excess  of 
the  margin  of  error  in  waste  or  weight  be  inquired  into. 
Where  this  has  not  been  corrected  by  scale  adjustment 
or  individual  weighings,  a  comparative  statement  of  ex- 
cess and  deficiency  under  various  headings  is  often  useful 
as  revealing  any  defects  in  ledger-posting  classification. 
According  to  the '  system  just  described  the  surveys 
would  theoretically  be  divided  between  three 
main  departments.  The  storekeeper  would  be 
responsible  for  the  store  of  raw  and  old  material  and 
such  articles,  other  than   manufactured  commodities  and 


1 88 


SURVEYS. 


Stock. 


plant,  as  may  for  the  time  be  in  his  charge.  The  next 
division  would  be  that  of  the  warehouseman,  who  would 
have  the  custody  of  the  stock  of  manufac- 
tured goods  ;  and  the  third  division  would  only 
exist  where  the  system  of  registration  of  plant  described 

STOCK  SURVEY   SHEET.— Specimen  No.  50. 
Stock  at  on 


Description 

Supplied  by 

No. 

Weight. 

Rate. 

Remarks. 

0 

o- 

1-1 

Value. 

Plant. 


in  the  chapter  on  Fixed  Capital  had  been  adopted,  and 
would  comprise  all  fixed  and  loose  plant  and  tools.  As 
has  already  been  pointed  out,  however,  there 
is  no  objection  in  principle  to  the  two 
departments  of  Stores  and  Stock  being  amalgamated,  so 
far  as  the  situation  and  custody  of  the  same  are  con- 
cerned, provided  the  important  distinction  in  the  book- 
keeping explained  in  previous  chapters  is  preserved.  When 
this  is  done  there  will  be  no  necessity  to  draw  any  funda- 
mental distinction  between  these  two  departments  for  the 
purpose  of  surveys  beyond  such  mechanical  divisions  as 
may  suggest  themselves  in  particular  cases  with  the  view 
of  facilitating  the  preparation  of  the  inventory.  If  that 
method  is  properly  carried  out,  it  will  be  found  to  be 
purely  a  matter  of  convenience  in  any  business  what 
divisions  are  made  in  the  arrangement  and  disposition 
of  the  various  articles.     In   the  same  way  as  the  books, 


CUSTODY  OF  STORES  AND  STOCK.        1 89 

when  properly  kept,  will  bring  out  the  correct  quantity 
and  value  of  the  plant  wherever  the  machines  and  tools 
constituting  the  plant  may  be  located,  so  they  will  also 
show  the  value  of  the  stores  and  stock,  no  matter  where 
these  may  be  distributed.  It  is  quite  evident,  however,  that 
the  quantity  of  stores  and  stocks  on  hand  may  be  of  such 
magnitude  as  to  render  the  division  of  responsibility  a 
matter  of  absolute  necessity.  It  will  then  probably  be 
found  advisable,  in  addition  to  carrying  out  the  three  main 
divisions  before  suggested,  to  give  distinctive  names,  num- 
bers, or  letters,  to  the  different  subdivisions  of 

Mechanical  ,  ,  .  ,  .^ 

divisions         the    storcs    and    warehouses,    and    to    identity 

and  aids.  i-      -  •    1   •  •  •   1         1         1  i- 

those  distinguishing  signs  with  the  headings 
of  the  corresponding  accounts  in  the  Ledgers.  Each 
floor,  room,  or  section  could  be  under  the  charge  of  one 
man,  who  should  be  responsible  for  the  accuracy  of  the 
records  of  the  articles  in  that  place,  and  should  have  a 
place  for  everything,  and  have  everything  in  its  place. 
He  will  be  much  assisted  in  his  work  if  the  store  or 
warehouse  is  fitted  with  such  bins,  racks,  shelves  or  other 
receptacles  as  are  most  suitable  for  the  materials  or  articles 
dealt  in,  and  by  those  of  the  same  species  being  stored 
near  to  each  other.  Each  of  these  species  may  also  be 
advantageously  referred  to  by  numbers,  and  the  sizes  or 
other  variations  therein,  either  by  letters  conjoined  with 
the  numerals,  or  by  further  numerals  used  as  a  denomina- 
tor. A  Store  or  (as  the  case  might  be)  a  Stock  Register, 
would  thus  permit  of  the  identification  of  each  article  by 
name  and  numbers,  and  also  record  their  location  in  the 
building,  the  general  lay-out  of  which  should  be  recorded 
on  a  plan.  The  custodian  saves  himself  trouble,  and 
avoids  confusion,  by  placing  on  all  large  articles,  and  on 
the  lockers  or  partitions  containing  the  smaller  ones, 
labels,  or  tags,  describing  the  articles,  and  giving  in  the 


IQO  SURVEYS. 

case  of  raw  materials  the  name  of  the  suppHer,  and  in 
the  case  of  manufactured  articles  the  number  of  the  stock 
or  manufacturing  order,  the  date  of  receipt,  and,  if  thought 
advisable,  the  price  of  the  article  marked  either  in  ciphers 
or  in  plain  figures.  The  utility  of  indicating  the  price  is 
not  confined  to  surveys,  but  enables  the  issuer  of  material 
or  stock  to  immediately  mark  on  the  Stores  Warrant  or 
Stock  Requisition  the  price  of  the  article  he  has  issued 
without  referring  to  the  Ledger.  The  labels  or  "  tags " 
are  often  so  ruled  or  arranged  as  to  permit  of  the  recording 
thereon  of  all  the  receipts  and  issues  of  the  goods  stored 
in  the  particular  receptacle.  Lockers  or  similar  receptacles 
should  be  marked  with  their  own  weight  so  as  to  permit,  if 
thought  desirable,  of  the  contents  and  receptacles  being 
weighed  in  one  operation.  Barrows  and  other  similar  appli- 
ances should  also  have  their  tare  weight  painted  on  them. 
The  stores  building  should  be  located  conveniently  to  a 
railway  siding,  a  wharf,  or  a  road.  The  stores  of  the 
different  articles  should  be  located  as  near  as  is  con- 
veniently possible  to  the  shops  in  which  the  articles  are 
mostly  used.  In  the  location  of  the  articles  in  the  stores, 
regard  should  be  had  to  ease  in  lifting  and  to  the  number 
of  times  they  are  likely  to  be  called  for,  so  as  to  reduce 
labour  in  handling  to  a  minimum.  The  essence  of  the 
satisfactory  working  of  a  stores  or  stock  system  is  that 
Essential  of  articles  should  not  be  issued  without  the  issuer 
stock*  *"^  receiving  a  formal  requisition  for  them  from 
system.  some  authorised   person.     The  articles  he  has 

in  charge  should  be  to  the  storekeeper  or  warehouseman 
what  cash  is  to  a  cashier.  No  one  expects  a  cashier  to 
part  with  money  save  as  against  a  cheque  or  receipt, 
and  no  one,  not  even  the  principal,  should  expect  a 
warehouseman  or  storekeeper  to  part  with  goods  save  as 
against  a  written  requisition  or  receipt.      In   some  cases 


CUSTODY   OF   STORES   AND   STOCK.  I9I 

in  which  loose  tools  are  kept  as  part  of  the  stores  or  stock, 
and  issued  to  employees  temporarily  for  a  special  use, 
a  suitably  stamped  token  is  accepted  from  the  employee 
as  the  equivalent  of  the  tool,  and  the  token  is  placed  in 
the  space  left  vacant  by  the  issue  of  the  tool.  Should 
either  the  storekeeper  or  warehouseman  feel  that  he  has 
not  a  sufficient  control  over  articles  in  his  charge,  owing  to 
their  not  being  in  the  magazine  or  warehouse,  or  for  any 
other  reason,  the  articles  may  be  chained,  padlocked, 
sealed,  or  otherwise  distinguished  in  such  a  manner  as 
to  show  that  they  are  still  either  "  stores "  or  "  stock." 
In  this  connection  it  may  be  well  to  point  out  that  in 
establishments  where  large  numbers  of  workpeople  and 
others  pass  through  the  gate,  the  watchman  or  gatekeeper 
should  have  instructions  not  to  allow  any  raw  material  or 
manufactured  goods  to  be  taken  outside  the  factory  either 
by  employees,  or  in  carts  or  other  vehicles,  without  the 
necessary  permit  from  the  storekeeper  or  warehouseman. 
These  permits,  or  passes  out,  should  be  entered  by  the 
warehouseman  or  gatekeeper  in  a  Gate  Book  which  should 
be  periodically  examined  and  checked  in  the  office.  The 
Gate  Book  should  also  contain  records  of  goods,  whether 
received  from  vendors,  or  returned  by  customers  which 
have  passed  the  gate,  which  should  be  the  sole  means  of 
exit,  and  which  should  lock  from  the  inside  only.  The 
watchman  or  gatekeeper  should  also  be  instructed  to 
look  at  the  contents  of  carriers'  carts  when  leaving  the 
works,  after  delivering  goods,  so  that  material  may  not 
be  improperly  taken  out  of  the  works  by  these  means. 
In  some  cases  the.  vehicle  and  its  contents  should  be 
weighed  at  the  gate,  the  net  weight  obtained  and  compared 
with  the  dispatch  note  or  permit. 

An    incidental   advantage   of  keeping  stores  and  stock 
on  the   system  described   is  that  it  permits  of  a    Stores 


192  SURVEYS. 

Price  Book  and  Index  being  kept  with  comparatively 
little  additional  clerical  work.  The  Price  Book  is  a 
valuable  record  of  prices,  whilst  the  Index  locates  the 
position  in  the  store  of  various  kinds  of  material. 

Although  the  distinction  between  Stores  and  Stock  is 
fundamental,  and  is  not  likely  to  be  lost  sight  of  by  the 
reader,  it  is  well  to  point  out  the  desirability  of  the  store- 
keeper having  a  general  knowledge  of  the  nature  and 
quantity  of  stock  in  the  warehouse,  and  of  the  ware- 
houseman being  equally  well  informed  of  what  material 
is  in  store.  When  parts  of  an  article  are  both  used  in 
manufacture  and  sold,  there  will  be  a  supply  both  in  the 
warehouse  and  in  the  store,  and  any  sudden  or  abnormal 
demand  on  either  of  the  departments  can  be  met  by  the 
Excess  °"^  department  transferring  its  surplus  to  the 

Supply.  other,  in  order  to  meet  the  emergency.     An  idle 

or  excessive  supply  is  not  wanted  in  either  branch,  and 
although  the  articles  common  to  both  are  not  likely  to  be 
numerous,  the  rise  or  growth  of  such  excess  could  be  easily 
checked  by  the  warehouseman  being  supplied  at  intervals 
with  a  schedule  of  the  articles  in  store,  which  could,  if 
necessity  arose,  be  transferred  to  him  as  stock,  and  by  the 
storekeeper  being  provided  with  similar  information  as  to 
the  stock.  It  is  evident  also  that  an  equally  efficacious 
check  could  be  applied  in  the  general  office,  where  both 
the  stock  and  store  of  any  article  would  be  known,  and 
whence  no  order  to  manufacture  would  proceed  until  it 
was  shown  that  the  number  on  hand  was  not  sufficient  to 
meet  the  demand.  A  list  of  parts  should  be  prepared 
under  a  symbolic  notation,  and  used  uniformly  in  office, 
stores,  and  shops. 

The  principles  which  determine  the  question  of  how 
materials  and  manufactured  articles  are  to  be  priced  at  a 
survey  admit  of  much  discussion,  but  we  cannot  here  do 


VALUATION   OF   STORES  AND  STOCK.  1 93 

more  than  indicate  the  general  axioms  which  should  be 
observed  in  a  valuation  of  Stores  and  Stock.  It  is  obvi- 
Survc  ously  unsound  to  base  a  valuation  one  year  upon 

Prices.  the  cost  of  production  of  an  article,  and  another 

year  upon  its  estimated  or  even  ascertained  market  value  ; 
but,  nevertheless,  it  is  to  be  feared  that  this  is  not  infre- 
quently done.  The  course  adopted  by  probably  most 
manufacturing  firms  is  to  value  the  stores  at  the  net 
cost  or  invoicing  price  to  them,  work  in  progress  at 
the  amount  spent  upon  it  up  to  the  process  which  it  has 
reached,*  and  the  manufactured  articles  on  hand  at  their 
cost,  without  any  addition  for  profit,  or  for  standing  charges 
as  distinguished  from  factory  charges.  Recently  (April 
19 1 7)  the  Federal  Reserve  Board  of  Washington  has  issued 
proposals  for  "  Uniform  Accounting."  In  the  section 
dealing  with  "  Inventories,"  most  of  the  recommendations 
contained  in  this  chapter  are  to  be  found.  Par.  27,  the 
final  paragraph,  states  :  "  It  may  be  well  to  reiterate  that 
interest,  selling  expenses,  and  administrative  expenses 
form  no  part  of  the  cost  of  production,  and  therefore 
should  not  be  included  in  the  inventory  in  any  shape." 
In  some  cases  in  which  varying  quantities  of  raw  material 
of  the  same  description  are  obtained  from  various  suppliers, 
and  are  used  for  a  number  of  production  or  stock  orders, 
it  is  usual,  in  order  to  save  clerical  labour,  to  charge 
the  issues  out  on  the  basis  of  a  monthly  average  price, 
obtained  by  taking  the  quantity  on  hand  at  the 
beginning  of  the  month  and  at  its  value,  adding  thereto 
the  purchases  for  the  month  and  their  values,  and  taking 
the  average  price  thus  obtained  as  the  price  for  all  issues 
during  the  month.  The  greater  accuracy  that  would  arise 
from  charging  out  each  issue  at  its  actual  cost  is  said  not 

*  See  last  paragraph  in  Chapter  IV. 

O 


194  Surveys. 

to  be  worth  the  value  of  the  clerical  labour  involved,  and 
that  in  fact  the  variation  is  but  slight.  Such  variation 
would  naturally  be  greater  if  the  average  cost  for  the 
preceding  twelvemonths  were  taken,  as  was  suggested 
by  Mr.  Elbourne  and  Mr.  Maughfling  in  "  Approximation 
in  Factory  Accounting."  In  the  case  of  material  or 
articles,  such  as  wine  or  timber,  laid  down  for  seasoning 
or  maturing  purposes,  the  invoicing  price  is  sometimes 
increased  pro  rata  to  the  amount  which  may  have  been 
charged  to  the  account  in  the  Commercial  Books  as 
representing  interest  on  the  capital  expended  in  the 
purchase  of  material  not  ready  for  use.  The  same 
procedure,  but  only  up  to  the  limits  of  normal  or  average 
price,  is  probably  justifiable  when,  owing  to  some  special 
circumstances,  such  as  a  forced  realisation,  or  sale  by 
auction,  stores  or  material  have  been  purchased  at  less 
than  cost  price.  Profit  which  may  eventually  arise  from 
the  use  or  sale  of  specially  low  purchases  should  not  be 
anticipated,  but  it  would  not  seem  unreasonable  to  charge 
interest  on  the  dormant  capital,  but  subject  to  the  limits 
already  referred  to.  In  some  metal  trades  the  method 
of  pricing  stocks  is  based  on  different  principles  to  those 
adopted  in  the  case  of  manufactured  articles.  Thus  with 
copper,  lead,  spelter,  some  of  the  stock  is  taken  at  basic 
value  on  the  theory  that  it  is  necessary  for  the  owners  to 
hold  a  reserve  stock  to  protect  themselves  against  strikes 
and  adverse  fluctuations  in  market  value.  The  price  repre- 
sents a  minimum  cost  over  a  series  of  years  for  a  minimum 
quantity  which  is  presumed  to  be  kept  untouched.  It  is 
held  by  some,  however,  that  as  in  most  trades  the  actual 
stock-in-trade  is  used  within  a  comparatively  short  time, 
and  that  as  the  stock  lowers  in  price,  so  also  do  the 
corresponding  sales,  that  no  hardship  arises  in  normal 
times  from  applying  the  usual  rules.     Rules  which  may  be 


VALUATION    OF   MANUFACTURED   ARTICLES.         195 

equitable  under  conditions  and  circumstances  coincident 
with  the  Excess  Profits  Duty  are  not  necessarily  applicable 
under  other  conditions. 

In  some  instances  advantage  may  arise  from  the  cost 
of  the  Stores  Department  being  met  by  a  percentage 
commission  being  charged  on  the  value  of  the  Stores 
issued,  and  it  has  been  suggested  that  this  loading 
percentage  should  equal  the  discount  at  which  supplies 
are  bought,  so  that  the  Stores  Department  would  thus 
automatically  make  a  profit  or  loss,  equal  to  the  amount 
by  which  its  expenses  were  less  or  greater  than  the 
aggregate  discounts  it  obtained.  This  method, however,  may 
lead  to  departmental  friction,  and  in  some  cases,  especially 
where  large  trade  discounts  are  allowed,  would  tend  to 
vitiate  the  actuality  of  cost  records.     The  prac- 

Book  values       .  -.,,.  .  .  rr-i 

should  not      tice  of  including  in   the  valuation  of  Stock  a 

include  es-  1  1  •    i 

tabiishmcnt    percentage     for     establishment     expenses,    or 

charges.  ^,.,  .  ,.,  , 

standing  charges,  is  one  which  cannot  be  too 
strongly  condemned,  if  on  no  other  ground  than  that  a 
business  which  is  really  the  reverse  of  profitable  might, 
by  the  simple  device  of  manufacturing  and  accumulating 
a  large  stock,  be  made  to  appear  for  a  time  as  at  any 
rate  self-supporting.  That  is  to  say,  a  business  might 
be  made  to  appear  flourishing,  while  as  a  matter  of  fact 
it  was  becoming  less  solvent,  by  reason  of  its  cash  and 
other  available  assets  being  converted  into  manufactured 
stock  which  may  never  be  realisable,  and  by  the  standing 
charges  (if  these  are  included),  which  in  the  absence  of 
bond  fide  business  transactions  would  represent  losses,  being 
made  to  figure  in  the  balance-sheet  as  good  assets  in  the 
fts  r  shape  of  stock  on  hand.  The  right  principle 
latent.  undoubtedly  is  that  in  a  manufacturing  business 

a  profit  should  not  be  considered  to  have  been  made  until 
a  sale  has  been  effected,  or  until  a  contract  for  the  delivery 


196  SURVEYS. 

at  a  future  date  of  goods  already  manufactured  has  been 
entered  into.*  In  cases  in  which  raw  material  is  purchased 
for  use,  it  should  be  taken  into  stock  at  cost.f  In  the  case 
of  the  production  of  raw  materials  and  in  those  exceptional 
cases  in  which  the  stock  of  manufactured  articles  could  be 
put  upon  the  market  and  realised  at  their  normal  price,  a 
modification  of  this  principle  may  sometimes  be  necessary  ; 
as  in  cases  where  the  product  is  generally  saleable  at  an 
ascertained  market  price  (or,  at  any  rate,  at  an  approxima- 
tion to  it),  and  it  does  not  seem  incorrect  to  say  that  the 
profit  which  that  price  leaves  has  been  earned  on  the 
production  of  the  commodity  and  not  on  its  sale.  Never- 
theless, even  in  this  case,  it  would  probably  in  the  long  run 
prove  to  be  more  judicious  to  price  the  commodity  in  the 
books  at  its  cost,  and  only  to  credit  profit  and  loss  account 
with  the  profit  when  sales  have  been  effected.  In  the 
exceptional  case  of  the  market  price  being  lower  than  cost, 

*  "Profits  can  only  be  made  out  of  the  sale  or  exchange  of  one 
commodity  for  another  of  a  definite  and  realisable  cash  value.  The 
price  increase  in  the  market  value  of  an  article  which  it  is  not  intended 
to  sell  at  that  time,  cannot  be  considered  as  a  profit,  for  the  reason  that 
the  article  may  never  be  sold  at  that  price,  and  the  paper  profit  may 
never  be  realised.  ...  In  a  quite  recent  case,  the  directors  of  a  corpora- 
tion have  been  held  personally  liable  for  a  sum  of  $1,000,000  in  respect 
of  dividends  distributed  to  stockholders  out  of  fictitious  profits  created  in 
just  this  way." — A.  L.  Dickinson,  M.A.,  F.C.A.,  C.P.A.,  "Some  Special 
Points  in  Corporation  Accounting." 

In  the  opinion  given  by  the  Committee  of  Consulting  Accountants  advising 
the  Ministry  of  Munitions  in  1917,  the  opinion  is  expressed  "  that  all  stocks  of 
every  sort  and  kind  should  be  valued  on  the  basis  of  cost  price  or  market  value, 
whichever  is  the  lower."  This  principle  rests  upon  the  theory  (which  is 
perfectly  sound)  that  profits  can  only  be  realised  by  the  sale  of  commodities, 
and  that  no  profit  can  arise  by  mere  increase  of  value  unaccompanied  by  a  sale. 

t  Thus  in  the  case  of  a  brewery,  "  Hops  should  be  taken  into  stock  at  cost, 
for  supposing  .  .  .  the  price  fell,  this  would  mean  not  that  the  brewery  has 
made  a  loss,  but  that  if  they  had  waited  and  purchased  at  present  prices  they 
would  have  made  a  larger  profit  out  of  next  year's  brew." — F.  R.  M.  de  Paula, 
"  Sonr.e  Further  Notes  on  Auditing." 


VALUATION    OF   MANUFACTURED   ARTICLES.         197 

the  market  price  should  be  taken.*  These  principles  may 
require  some  modification  in  their  application  in  war  or 
other  abnormal  times.  At  such  periods  it  seems  not  un- 
reasonable to  value  assets  at  the  price  they  may  be  expected 
to  realise  when  the  opportunity  or  necessity  to  realise 
them  arises,  or  if  the  price  of  some  commodities  is  written 
down  because  of  the  exceptional  times.  The  price  of 
others  which  have  increased  in  present  value,  and  seems 
likely  to  continue  at  that  level  during  the  exceptional 
period,  may  be  increased.  It  is  sometimes  considered  that 
the  value,  for  balance-sheet  purposes,  of  raw  material 
should,  if  cost  be  taken,  be  the  cost  less  the  freight, 
when  such  cost  is  on  the  basis  of  a  delivered  price.  If 
the  material  has  to  be  resold,  the  freight  is  probably  an 
unrealisable  part  of  the  cost,  which  should  be  provided 
against  either  by  reduction  of  price  or  b}'  a  reserve.  It 
has  been  previously  mentioned  that  material  or  partly 
finished  articles  when  transferred  from  one  department  to 
another  should  be  priced  at  their  direct  cost  only,  and,  as 
pointed  out  by  Mr.  William  Lybrand,  C.P.A.,  in  an  interest- 
ing paper  on  "  The  Accounting  of  Industrial  Enterprises," 
read  at  an  Annual  Meeting  of  the  American  Association  of 
Public  Accountants  at  Atlantic  City,  New  Jersey,  this  rule  is 
also  applicable  in  the  case  of  a  Trust  or  ^Merger  Company  in 
relation  to  its  subsidiary  companies,  Mr.  Lybrand  points  out 
that  the  purchase  having  been  made  by  one  subsidiary  com- 
pany from  another,  is  in  effect  merely  a  transfer  from  depart- 
ment to  department  of  virtually  the  same  corporation,  and  not 
a  sale  on  which  the  profit  can  be  said  to  have  been  realised. 
The  principle  that  profits  must  not  be  anticipated  would 
seem  therefore  to  be  applicable  in  such  instances,  and  it 

*  The  rule  suggested  by  Mr.  Pixley,  "That  nothing  should  be  taken  credit 
for  at  a  higher  price  than  the  trader  would  be  willing  at  that  moment  to  pay 
for  it  for  the  purposes  either  of  immediate  sale  or  putting  it  by  for  a  better 
opportunity  of  sale  later  on,"  does  not  seem  capable  of  universal  application. 


198  SURVEYS. 

would  follow  that  a  reserve  should  be  provided  equal  to 
the  amount  by  which  such  merchandise  at  inter-company 
prices  exceeds  its  actual  manufacturing  cost.  In  the  case 
of  seasonal  outputs  of  produce  companies,  it  is  considered 
that  the  balance  of  advantage  is  in  the  accounts,  showing 
the  profits  of  the  season,  and  that  stocks  unsold  at  the 
balancing  period  can  properly  be  taken  at  selling  prices, 
provided  they  are  in  fact  sold  before  the  accounts  are 
finally  made  up  and  presented.  There  are,  however,  many 
cases  in  which  cost  may  fairly  include  interest  {vide  pages 
119  and  120).  The  price  of  goods  purchased  necessarily 
includes  a  charge  for  interest  plus  profit.  Profit  may  be 
considered  as  the  extra  remuneration  for  the  risk  under- 
taken above  the  normal  rate  of  interest  allowed  when  no  risk 
is  taken.  In  the  case  of  contracts  based  upon  a  fixed  rate 
of  profit  over  cost,  it  would  seem  that  interest  might  be  fairly 
chargeable  in  cost  at  a  rate  per  annum  for  the  time  in  which 
the  capital  is  employed.  Such  rate  of  interest  would  be 
independent  of  whether  the  capital  was  borrowed  capital  or 
share  capital  remunerated  by  dividend.  Some  confusion  has 
arisen  through  it  being  thought  that  the  interest  to  be  in- 
cluded was  to  be  based  on  the  share  and  the  borrowed  capital 
of  an  undertaking.  Theinterestincluded  should  be  calculated 
on  the  capital  employed  for  the  particular  work.  Differences 
in  the  mode  of  raising  the  capital  would  probably  make  no 
great  material  differenceintheascertained  cost  of  the  product. 
The  rule  is  not,  however,  in  Mr.  Lybrand's  opinion  one 
of  unreserved  application,  and  he  instances  the  case  of  an 
iron  and  steel  combination  controlling  the  manufacture  of 
its  product  from  the  ore  in  the  ground  to  the  sale  of  the 
finished  merchandise.  In  some  cases  there  are  a  number 
of  points  in  the  process  of  manufacture  where  the  merchan- 
dise reaches  a  finished  and  marketable  stage.  While  at  each 
stage  in  the  manufacturing  process  some  of  the  merchandise 
is  sold  to  outsiders,  much  of  it  is  transferred  to  other  mills 


VALUATION   OF   MANUFACTURED   ARTICLES.         I99 

for  further  manipulation  at  a  price  which  includes  some 
profit  to  the  subsidiary  company  by  which  it  was  handled. 
Is  it  entirely  unreasonable  to  claim  that,  where  the  manu- 
facturing processes  are  distinct  and  complete,  some 
manufacturing  profit  shall  be  taken  in  the  current  Income 
Account  on  merchandise  finished  by  one  company,  but 
remaining  in  the  inventory  of  another  company  while 
awaiting  further  transformation  ? 

In  the  balance-sheet  of  a  large  industrial  enterprise 
such  profits  are  applied  as  a  separate  part  of  the  Surplus 
Account  distinct  from  the  ordinary  accumulation  of  surplus 
with  a  note  appended  setting  forth  clearly  the  nature  of 
the  item. 

In  the  majority  of  cases  manufactured  stock  has  to  be 
kept  till  a  demand  for  it  arises  and  orders  are  received. 
In  the  meantime  it  may  deteriorate  or  the  price  may 
fall,  or  in  certain  cases  it  may  go  out  of  fashion.  The 
system  of  valuing  at  cost  has  the  additional  advantage 
when  stocks  are  held  for  any  length  of  time,  of  obviating 
the  necessity  for  periodical  alterations  of  the  valuation 
and  consequent  adjustment  of  the  profit  and  loss  account 
owing  to  fluctuations  in  the  market  price  of  the  com- 
modities. A  valuation  based  upon  cost,  not  including 
in  the  term  standing  charges  and  interest  on  capital,* 
would  hold  good  for  a  long  period  of  time  ;  so  long,  in 
fact,  as  the  article  was  preserved  in  its  pristine  condition, 
unless  improved  processes  or  other  causes  should  so 
reduce  the  cost  of  similar  articles  as  to  render  a  corres- 
ponding reductioji  of  the  valuation  of  the  old  stock 
necessary  in  order  to  establish  the  proper  relation  between 

*  "To  change  interest  into  costs  is  in  effect  to  add  to  these  costs  a  certain 
amount  of  profit  before  it  has  been  made,  and  is  therefore  against  sound 
commercial  and  accounting  principles." — Dickinson,  supra. 


200  SURVEYS. 

it  and  the  new  price  that  would  probably  rule  in  the 
market.  Any  deterioration  which  the  goods  on  hand  may 
undergo  through  being  old,  out-of-date,  or  through  other 
causes,  should,  of  course,  be  periodically  written  off,  and 
the  stock  thus  brought  down  to  probable  realisable  value. 
When  stocks  become  entirely  obsolete  they  should  be  re- 
duced to  their  scrap  value.  Inordinate  reduction  in  the 
value  of  assets  however  is  not  always  a  proceeding  deserving 
unqualified  approval.  It  is  quite  conceivable  that  by  taking 
undue  advantage  of  facilities  and  opportunities  which  may 
exist  at  particular  periods  for  writing  down  the  value  of 
assets,  the  firm  or  company  may  be  placed  in  the  position 
during  subsequent  years  of  making  book  gains  which 
would  not  be  realised  but  for  the  previous  artificial 
reduction  in  values,  and  in  this  way  the  accounts  of 
the  business  are  apt  to  prove  misleading.  It  is  well  that 
this  effect  of  excessive  reductions  in  value  should  not  be 
overlooked,  indeed,  its  dangers  appear  to  have  been 
recognised  by  the  Legislature,  for,  under  the  Companies 
Act,  reduction  of  paid-up  capital  is  limited  to  the  amount 
which,  according  to  the  affidavits  of  responsible  officials, 
has  been  lost,  or  is  unrepresented  by  available  assets.  The 
old  material  on  hand  should  be  taken  in  a  stores  sur- 
vey at  the  market  value  of  such  old  material,  or  at  the 
price  at  which  similar  old  material  was  last  disposed  of, 
unless  such  price  be  higher  than  the  market  price,  in  which 
case  the  lower  value  should  be  taken.  It  is  desirable  that 
in  both  the  Stores  and  Commercial  Ledger  old  material 
should  be  kept  in  an  account  distinct  from  new  material. 

The  amount  by  which  stock  is  to  be  written  down  in 
respect  of  ascertained  depreciation  may  be  debited  to 
profit  and  loss  or  subsidiary  trading  account,  and  credited 
to  the  Stock  account  in  the  Commercial  Ledger  through 


TH  Stock. 


Stocj-. 


and  Plant,  being  cotitmgent 


agTam. 


[  To  face  p.  200. 


r 


e' 


Diagram    V. 

HE  Relation  of  the  Books  and  Forms  used  in  connection 
( The  numbers^  where  shown,  correspond  to  the  specimen  rulings.) 


■  between   Warehouse,  Plant,  and  Store,  and  between  Store,  Warehouse,  und  Plafit.  being  t 
and  purely  departmental  adjustments,  are  not  shown  on  this  diagjam. 


C 


VALUATION   OF   MANUFACTURED   ARTICLES.        2OI 

the    Journal.      The    warehouseman    would    pass   a    stock 

requisition  through  the  Stock    Issued  Book  to  the  credit 

of  his    Ledger   accounts  in   the  same  way  as 
Loss  on  •/-    1 

Stores  and     if  the  amount  represented  withdrawal  of  stock  ; 

and  the  same  procedure  applies  in  the  case  of 

reduction  in  the  value  of  stores. 

Having  referred  to  the  more  prudent  policy  of  not 
including  the  expenditure  of  standing  charges  in  the 
valuation  of  stock  in  hand,  it  may  be  desirable  to  point 
out  that  cases  arise  in  engineering  and  other  con- 
structional establishments  in  which  extensions  are  carried 
out  by  means  of  the  plant  and  appliances  of  the  firm 
instead  of  the  work  being  entrusted  to  others. 

If  the  revenue-earning  power  of  the  undertaking  is 
increased  by  such  additions,  it  is  doubtless  permissible  to 
charge  the  cost  to  capital.  In  such  capitalisation,  however, 
care  should  be  taken  not  to  include  any  standing  or  other 
charges  which  would  have  been  incurred,  whether  the 
extensions  had  taken  place  or  not,  and  even  a  charge  for 
the  use  of  machinery  and  plant  should  be  very  carefully 
scrutinised,  with  the  view  of  avoiding  the  inclusion  as 
realised  profits  of  amounts  which  are  merely  transfer 
profits  between  departments  or  branches.  The  saving 
that  may  be  made  by  the  work  being  done  at  cost  must 
not  be  confused  with  a  profit  earned. 


CHAPTER   X. 

SUBSIDIARY   BOOKS. 

It  remains  to  refer  to  some  subsidiary  books  in  use  in 
factories  and  warehouses,  which,  although  they  have  an  im- 
portant bearing  on  Factory  Accounts,  do  not 
Subsidiary      ^  '^  ^  ' 

Factory         properly  fall  under  any  of  the  preceding  chapters. 

Not  to  detract  from  the  main  issues  of  our 
subject  we  have  studiously  avoided  special  reference  to 
these  ancillary  books  and  matters,  and  we  do  not  now  refer 
to  them  with  the  view  of  attempting  to  exhaust  the  cata- 
logue of  account-books  which  in  practice  may  be  necessary 
in  a  factory.  Such  an  attempt  would  be  altogether  futile 
by  reason  of  the  conditions  and  requirements  of  indi- 
vidual businesses  varying  too  widely  to  warrant  any- 
thing more  than  a  general  statement  being  made  of  the 
fundamental  principles  underlying  the  economy  and 
routine  of  a  factory— principles  to  which  all  details  to  be 
of  service  must  conform. 

In  this  chapter  we  shall  first  describe  the  method  of 
book-keeping  to  be  adopted  in  the  case  of  plant  or  machi- 
summaryof  nery  acquired  on  terms  of  deferred  payments, 
Chapter.  ^^^j  mention  a  few  considerations  bearing  on 
the  subject  of  the  accounts  of  Government  and  municipal 
factories,  and  on  those  of  the  workshops  of  railway   and 


PURCHASE   HIRE   SYSTEM. 


203 


similar  undertakings  where  expenditure  and  production 
are  of  the  nature  of  auxiliary  operations  and  have  not  for 
their  primary  object  the  raising  of  revenue  or  the  making 
of  profit.  We  shall  then  deal  with  a  few  of  the  books 
employed  to  record  transactions  with  regard  to  such 
matters  as  cartage,  van,  wagon,  craft,  and  railway  traffic, 
packing,  and  fuel 

Inasmuch  as  the  practice  of  purchasing  plant  on  what 

is  known  as  the  purchase  hire  system  is  becoming  more 

general, — there    being    in    some    circumstances 
Purchase  .        ,  .  .  - 

Hire  an   economy  m  the  acquisition    of  new  plant, 

ys  em.  machinery,  wagons,  etc.,  on  terms  of  deferred 

payments, — it  is  desirable  to  consider  the  entries  which 
should  be  made  in  recording  such  transactions.  It  has 
been  suggested  that  a  simple  and  safe  method  of  dealing 
with  the  book-keeping  pertaining  to  this  system  is  to  ascer- 
tain what  will  be  the  "ultimate"  value  of  the  object  when 
the  various  instalments  have  been  paid,  and  to  divide  this 
"ultimate"  value  by  the  number  of  the  instalments,  and 
credit  the  product  to  capital  each  time  an  instalment  is 
paid,  the  remainder  of  the  instalments  being  debited  to 
profit  and  loss  account.  For  example,  it  is  suggested 
that  in  the  case  of  a  wagon  purchased  for  £60,  payable 
in  twenty  instalments,  the  ultimate  value  being  ^40, 
that  as  each  instalment  is  paid  £2  should  be  charged 
to  capital  and  £\  to  profit  and  loss  account.  The 
method  suggested  is  undoubtedly  a  simple  one,  and  in 
many  cases  it  is  probably  as  correct  as  the  circumstances 
require.  In  the  illustration  given  we  assume  that  the 
"  ultimate  value "  of  the  object— after  the  payment  of 
all  the  instalments — covers  an  amount  for  depreciation 
during  the  time  it  has  been  in  use  ;   but  in  any  case  we 


204  SUBSIDIARY   BOOKS. 

think  it  would  be  well  that  the  amount  charged  under  the 
various  heads  should  be  more  fully  specified.  The  differ- 
ence between  the  cost  value  to  the  purchaser  of  an  object 
acquired  upon  terms  of  deferred  payments  and  its  "  ulti- 
mate," i.e.  ordinary  value,  is  the  product  of  two  factors, 
viz.  interest  on  the  deferred  payments,  and  the  natural  or 
normal  depreciation  by  use  and  deterioration  in  the  value 
of  the  object  during  the  period  of  hire.  We  submit  that 
these  factors  are  so  essentially  different  that  they  should 
be  separately  recorded.  The  one  bears  a  close  relation  to, 
and  has  to  be  considered  in  conjunction  with,  the  capital 
account  of  the  business,  and  the  rate  of  interest  borne  by 
that  account ;  the  other  is  a  trade  expense  which  is  regu- 
lated by  the  volume  of  business,  and  the  corresponding 
wear  and  tear  of  the  object  and  its  tendency  to  obsoles- 
cence. An  article  after  being  acquired  on  the  purchase 
hire  system,  should  be  debited  to  plant  or  other  appro- 
priate account  at  its  value  as  if  purchased  for  prompt  cash, 
and  the  difference  between  that  value  and  the  aggregate 
amount  payable  under  the  purchase  hire  agreement  should 
be  taken  to  an  interest  on  deferred  payments  account,  the 
whole  of  the  liability  being  carried  to  the  credit  of  a  per- 
sonal account  with  the  vendor  of  the  article. 

As  the  instalments  are  paid,  cash  account  would  be 
credited,  and  the  personal  account  with  the  vendor  would 
be  debited,  with  the  amounts  of  the  instalments.  The 
amount  debited  to  plant  or  other  account  would  be  written 
down  in  accordance  with  the  principles  of  book-keeping 
applicable  to  fixed  capital,  and  already  discussed,  whilst 
the  amount  standing  to  the  debit  of  interest  on  deferred 
payments  account  would  be  distributed  over  the  period 
of  hire.  This  is  on  the  assumption  that  all  the  instal- 
ments are  paid,  and  the  purchase  of  the  article  ultimately 


PURCHASE   HIRE   SYSTEM.  205 

completed  ;  but  should  this  not  be  the  case,  and  the  article 
be  returned  after  an  interval  of  hire,  the  personal  account 
with  the  vendor  would  be  closed  by  being  debited  with  the 
balance  standing  to  his  credit,  which  would  pro  tanto  be 
credited  to  the  plant  account  and  the  interest  on  deferred 
payments  account.  Any  remaining  balances  on  these  latter 
accounts,  representing  as  they  would  the  loss  on  the  non- 
completion  of  the  purchase,  would  be  passed  to  profit 
and  loss.  A  further  advantage  of  this  method  is  that 
it  enables  the  article  purchased  on  this  system  to  be 
treated  from  the  outset  as  if  it  were  actually  the  property 
of  the  intending  purchaser,  and  this,  it  will  be  recognised, 
is  the  only  sound  view  to  take  of  the  transaction,  as, 
although  not  the  legal  owner  till  the  final  payment  is 
made,  by  the  adoption  of  the  liability  he  becomes  the  eco- 
nomic owner.  If  the  purchase  should  not  be  completed, 
the  accounts  will  show  exactly  what  sacrifice  is  involved  ; 
and  they  would,  moreover,  show  the  position  of  the  trans- 
action at  any  stage  of  the  period  of  hiring.*  The  question 
of  deductions  from  profits  for  Income  Tax  purposes  on 
account  of  wagon  hire  purchase  and  the  views  or  practice 
of  the  surveyor  is,  however,  a  factor  to  be  borne  in  mind 
by  the  owner  in  determining  the  method  to  be  adopted. 
This,  however,  now  tends  to  uniformity  in  consequence 
of  the  scheme  agreed  to  in  19 14  between  the  Mining 
Association  of  Great  Britain  and  the  Inland  Revenue 
Authorities,  whereby  the  lessee  furnishes  the  Income  Tax 
Surveyor  with  a  copy  of  the  agreement,  and  a  certificate 
from  the  wagon  builder  or  some  equally  satisfactory 
evidence  as  to.  the  price  at  which  the  wagons  would 
have   been   sold   for   cash  at  the  date  of  the  agreement. 

*  The  subject  is  discussed  in  detail  in  a  lecture  by  Mr.  F.  Halsall,  A.C.A., 
on  "  Railway  Wagons  under  Hire  Purchase  Agreements."  The  Accountant, 
December  22,  1906. 


206  SUBSIDIARY   BOOKS. 

The  difference  between  the  cost  value  and  the  amount 
payable  is  treated  as  "  hire,"  and  allowed  in  equal  annual 
instalments  over  the  term  of  the  agreement  as  a  deduction 
from  profits  for  income  tax  purposes.  In  addition,  de- 
preciation is  allowed  off  the  cost  value  at  5  per  cent,  off 
the  reducing  annual  balance,  or  at  some  other  rate  to 
be  agreed.  When  "dead  ends"  are  converted  into  spring 
buffers  the  improvement  in  value  is  to  be  deemed  £^ 
per  wagon,  the  balance  of  cost  being  treated  as  repairs, 
and  the  £^  added  to  the  amount  on  which  the  annual 
allowance  for  depreciation  is  to  be  computed. 

There   is    necessarily   greater    simplicity   in    recording 

expenditure  in   those  cases  where   production   is  not  for 

profit,  and  articles  are  made  or  repaired  only 

not  working    for  the  sole  and  incidental  use  and  benefit  of 

for  profit.  ,  -        .       ,  .  111 

the  concern,  as,  for  mstance,  m  arsenals,  dock- 
yards, and  other  national  and  municipal  workshops,  rail- 
way, gas,  tram,  and  water  companies,  often  accounting 
under  statutory  regulations,  than  in  a  factory  working  for 
profit  in  competition  with  other  producers.  The  principles 
of  Factory  Accounts  explained  in  this  volume  are  in  all 
such  cases  applicable. 

Whilst  the  requirements  of  a  Government  arsenal,  how- 
ever, are  not  those  of  factories  working  for  profit,  which 
have  to  be  conducted  on  lines  enabling  the  proprietors,  in 
the  face  of  keen  competition  with  other  manufacturers,  to 

supply  the  demands  of  the  public  at  a  profit 
instead  o!       to  themsclves,  it  may,  in  passing,  be  mentioned 

that  an  ingenious  and  elaborate  system  of 
recording  the  expenditure  in  Government  workshops  by 
means  of  cards,  on  which  the  entries  are  made  by  symbols, 
has  been  described  by  Captain  Metcalfe.*     This  method 

*  "The  Cost  of  Manufactures."  Captain  Henry  Metcalfe.  New  York: 
Wiley. 


CARD  SYSTEMS.  20/ 

has  much  to  recommend  it,  but  it  does  not  very  well  admit 
of  the  assimilation  of  accounts  with  a  view  of  drawing  up 
periodical  statements  showing  the  profit  and  loss  on  all  the 
operations  and  the  actual  financial  position  of  the  concern. 
This  is,  in  fact,  admitted  by  the  author  himself,  when  he 
says :  "  I  have  vainly  tried  to  find  some  simple  current 
method  of  reconciling  the  cost  sheet  with  the  cash  accounts, 
since  this  would  establish  the  aggregate  truth  of  the  cost 
sheet  before  the  highest  court  of  audit  known  to  military 
accountability.  I  am  convinced  not  only  that  this  is  impos- 
sible, unless  either  the  papers  are  very  much  complicated, 
or  unless  substantial  truth  is  neglected  for  the  sake  of 
striking  a  balance  ;  but  I  also  believe  that  the  same  result 
is  indirectly  attainable  by  other  means  already  described." 
Although  the  defect  referred  to  may  not  be  inherent  in 
the  system  of  recording  expenditure  on  and  by  means  of 
cards  passing  through  a  number  of  hands  and  perform- 
ing a  variety  of  services  both  in  the  factory  and  in  the 
counting-house,  efforts  to  establish  such  a  system  have  not 
yet  been  very  successful. 

Other  writers,  who  have  recently  advocated  a  card  system, 
have  considered  that  the  difficulty  referred  to  by  Captain 
Metcalfe  would  be  obviated  by  showing  on  a  cost  sheet 
at  regular  intervals  or  balancing  periods,  the  total  amounts 
shown  by  the  cards  as  expended  on  all  orders  in  progress 
at  that  date,  as  well  as  the  amount  expended  on  orders 
finished  between  that  date  and  the  last  preceding  date  on 
which  such  entries  were  made.  It  is  claimed  for  the  card 
system  that  it  is  a  labour-saving  device,  reducing  the 
volume  and  cost  of  clerical  labour  employed  in  recording 
the  expenditure  of  labour  and  material.  This  claim,  if 
substantiated,  has  further  to  be  considered  in  relation  to 
the  more  detailed  attention  which  has  to  be  given  by  a 
manager  or  principal  to  the  examination  of  costs  recorded 


2o8  SUBSIDIARY  BOOKS. 

on  a  number  of  cards,  than  he  has  to  give  to  costs  recorded 
in  a  book  in  which  the  entries  follow  consecutively.  This 
objection  is  partly  met  by  the  institution  of  a  system  of 
"  comparison  cards,"  but  as  the  preparation  of  these  cards 
means  a  summarising  and  recording  of  the  contents  of  a 
large  number  of  cards  each  recording  one  item  only,  the 
saving  of  clerical  labour  is  not  very  apparent.* 

In  almost  every  manufacturing  business  the  item  of 
cartage  is  a  more  or  less  serious  factor.  If  the  cartage  be 
Cartage  ^^^  ^^^  Conveyance  of  raw  material  from  differ- 

books.  ent  parts  of  the  factory,  the  charge  is  one  on 

manufacturing  account,  and  should  be  allocated  to  the 
various  orders.  If  it  be  for  the  delivery  (by  road,  rail,  or 
water)  of  goods  sold  to  customers  on  the  basis  of  price 
at  the  sellers' works,  the  customer  is  debited  with  the  expense. 
In  other  cases  it  is  borne  absolutely  by  the  firm  and  is 
considered  in  fixing  the  price,  and  regarded  as  a  charge 
against  the  profits  of  the  business.  In  any  event  the  item 
is  one  admitting  of  large  economies,  by  a  proper  system 
of  registration.  If  cartage  be  done  by  an  outside  con- 
tractor, the  necessary  records  for  checking  his  accounts 
should  be  kept  by  the  employee  (generally  the  ware- 
houseman or  storekeeper)  by  whose  orders  the  work  is 
done.  The  contractor  would  receive  an  advice  (Specimen 
No.  51)  which  should  be  attached  to  the  account  when 
rendered. 

If  it  be  thought  necessary,  a  further  check  may  be 
obtained  by  instructing  the  gatekeeper  to  record  the 
times  at  which  carters  enter  and   leave  the  factory,  any 

*  Interesting  particulars  of  methods  adopted  under  card  systems  are  to 
be  found  in  a  paper  on  "Workshop  Administration,"  by  Mr.  David  Cowan, 
published  in  the  'fransattions  of  the  Jnstitii/ion  of  Eiii^incers  and  Ship- 
builders in  Scoiland,  and  in  the  "Complete  Cost  Keeper,"  by  Horace 
Lucian  Arnold  (Henry  Roland).     Engineering  J\Iagazine. 


CARTAGE  BOOKS. 


209 


delay  in  loading  or  unloading  being  noted.  If  the 
horses  and  vehicles  are  the  property  of  the  firm,  the  pur- 
chase price  of  the  horses  should  be  debited  to  a  horse 
H^>o„»  ,^A    account,  and  that  of  the  vehicles  to  a  vehicle 

Horses  and  > 

vehicles.  accouut,  and  each  account  should  periodically 
be  debited  with  interest  on  the  amount  of  the  capital  sum. 
The  carters  should  send  in  weekly  a  return  of  the  work 
done  by  them,  and  this  should  be  summarised  in  a  Cartage 


SPECIMEN  No.  SI. 

Cartage  advice, 


.19 


To  Mr. 


Please  supply  me  with  the  undermentioned. 


No.  of 
tlorses. 

Description  of 
Vehicle. 

Time 
Required. 

Time 
Arrived. 

Time 
Returned. 

Time  on 
Job. 

Order  to  be 
charged. 

Ordered  by 


Signature  of  Carman 


Book.  A  cartage  account  should  be  opened,  to  which 
should  be  debited  the  wages  of  the  carters,  stablemen,  the 
cost  of  forage,  stable  expenses,  etc.,  and  at  regular  intervals 
an  amount  from  the  horse  account  and  the  van  account  for 
depreciation.     The  depreciation  on  the  horse  account  can, 

P 


2IO  SUBSIDIARY    BOOKS. 

it  is  thought  by  many,  be  best  provided  for  on  the  basis 
of  annual  revaluation,  rather  than  on  the  basis  of  a  yearly 
depreciation  rate.  The  cartage  account  will,  of  course,  be 
credited  with  the  journeys  performed  at  such  rates  as  will 
equal  the  amount  charged  to  it.  It  is  only  through  keep- 
ing some  such  account  that  the  employer  can  ascertain 
accurately  whether  it  pays  him  better  to  purchase  and 
keep  horses  and  carts  than  to  employ  a  contractor.  In 
the  consideration  of  the  results  thus  shown,  the  proprietor 
if  he  has  an  agreement  with  the  War  Office  by  which  he 
obtains  a  subsidy  for  keeping  a  certain  number  of  horses 
in  stock,  on  which  the  War  Office  can  draw  if  the  necessity 
arises,  has  to  bear  this  relevant  fact  in  mind.  Procedure 
similar  in  principle  should  be  adopted  when  transport 
is  by  means  of  motor  lorries  or  similar  vehicles.  In  such 
case,  and  until  reliable  data  based  on  experience  is  ob- 
tained, the  important  consideration  will  be  the  adequacy 
of  the  charge  for  depreciation.  In  view  of  the  larger 
capital  outlay  necessitated  by  the  use  of  motor  vehicles, 
it  is  desirable  to  establish  checks  on  the  loading  of  the 
vehicles,  and  to  ascertain  cost  on  the  basis  of  a  combined 
mileage  and  weight  factor  generally  described  as  a  ton 
mileage  basis.  In  many  cases  this  unit  of  cost  can  be 
usefully  and  informatively  supplemented  by  one  which 
takes  cognisance  of  time,  and  shows  the  ton  mileage  on  an 
hourly  basis. 

In  view  of  the  need  that  often  arises  of  giving  quota- 
tions for  goods  inclusive  of  free  delivery,  and  of  checking 
Freight  ^^^  rates   charged    by  the  railway  companies, 

book.  i^-  is  very  desirable   to  record  the  quotations 

obtained,  or  rates  paid,  for  freightage.  At  present  many 
of  the  provisions  of  the  Acts  of  Parliament  which  have 
been  passed  for  the  protection  of  consignors  and  consignees 
are  in  abeyance,  or  in  course  of  modification,  under  the  new 


RAILWAY   RATES.  211 

procedure  instituted  by  the  Railways  Act  of  192 1,  It 
would  seem  desirable,  however,  pending  the  bringing  into 
operation  of  the  whole  of  the  new  procedure,  to  briefly 
summarise  the  main  principles  of  the  legislation  now 
under  revision.  Under  the  various  Railway  (Rates  and 
Charges)  Order  Confirmation  Acts  passed  in  1891  and 
1892,  consequent  upon  the  Railway  and  Canal  Traffic 
Act  of  1888,  the  maximum  tolls  and  charges  for  various 
classes  of  traffic  over  the  various  railways  were  prescribed. 
By  an  Act  of  1894,  the  railway  companies  could  not 
increase  their  rates  without  public  notice,  and,  subject  to 
the  provisions  of  the  Railway  Rates  Act  of  191 3,  they 
could  be  called  upon  to  justify  such  increase  of  rate  before 
the  Railway  and  Canal  Commission  Court.  In  checking 
the  accounts  or  the  rates  quoted,  the  classification  of  the 
traffic  should  receive  primary  consideration.  Having 
regard  to  the  varying  conditions  of  the  traffic,  it  was 
very  desirable  to  compare  the  actual  rates  charged  with 
the  maximum  authorised,  and  this  could  best  be  done 
by  means  of  a  book  ruled  as  shown  (Specimen  No.  52). 
The  goods  should  be  delivered  to  the  railway  company 
on  a  "  Consignment  Note,"  prepared  by  the  senders. 
If  a  form  prepared  by  the  railway  company  is  accepted 
for  use,  it  should  be  carefully  examined  to  see  that  none 
of  its  clauses  create  a  special  contract  with  regard  to 
owner's  risk  or  other  matters,  and  that  the  railway 
company  are  not  by  any  of  its  clauses  released  from 
their  special  or  general  liabilities. 

Care  should  be  exercised  in  declaring  the  weio-ht 
and  character  of  the  merchandise  consigned,  as  the 
Railway  Clauses  Consolidation  Act  prescribes  heavy 
penalties  in  cases  of  fraud.  Accuracy  in  these  matters  is 
of  importance  to  the  consignor,  the  railway  company,  and 
the  consignee. 


212 


SUBSIDIARY  BOOKS. 


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WAGON    BOOKS.  21 3 

In  the  case  of  firms  enjoying  the  advantages  of  a  raihvay 
siding,  a  special  book  should  be  kept  on  the  same  principle 
Railway  ^^  ^^^^  applied  to  the  Cartage  Book  just 
sidings.  described.    If  a  yearly  rental  is  paid  for  sidings 

and  trucks,  this  rental  and  any  incidental  items  should  be 
debited  to  an  account  to  which  is  credited  any  receipts 
from  this  source.  If  the  siding  is  on  land  belonging  to  the 
owner  or  occupier  of  the  works,  and  if  it  has  been  laid 
or  is  maintained  by  such  owner  or  occupier,  the  railway 
rate  charged  him,  either  for  the  receipt  or  forwarding  of 
goods,  should  not  contain  a  charge  for  the  provision  of 
such  terminus,  or  if  it  does,  the  owner  of  the  siding  is 
entitled  to  a  rebate  or  allowance.  The  railway  company 
may,  however,  have  a  right  to  make  a  charge  for  services 
rendered  at  or  in  connection  with  sidings  not  belonging 
to  the  railway  company.  The  Association  of  Traders 
known  as  "  The  Mansion  House  Association  on  Railway 
and  Canal  Traffic,"  carefully  watches  all  proceedings  in 
connection  with  private  sidings  and  other  matters  which 
come  before  the  Railway  and  Canal  Commission  Court, 
and  from  time  to  time  notifies  its  members  of  the  decisions 
of  that  Court  in  test  cases,  and  through  this  channel  manu- 
facturers can  obtain  much  information  enabling  them  to 
check  in  principle  the  accuracy  of  the  constituent  items  in 
the  railway  rates  charged  them. 

If  the  trucks  are  owned  by  the  firm,  then  their  pur- 
chase price,  together  with  interest,  should  be  debited 
to  a  Wagon  and  Van  A.ccount,  which  should  be  credited 
each  year  with  an  amount  for  depreciation,  the  amount 
so  credited  being  charged  to  an  account  which  would  in 
turn  be  credited  with  any  amount  received  for  the  use 
of  the  vehicles. 

A  Wagon  and  Van  Book  should  also  be  kept,  showing 
under  the  number  of  the  wagon  or  van  the  date  it  was 


214  SUBSIDIARY   BOOKS. 

dispatched,  destination,  load,  date  of  return,  and  number,  if 
any,  of  days'  demurrage  incurred.  The  book  should  be  so 
ruled  as  to  permit  of  the  earnings  of  the  wagons  and  vans 
being  ascertained,  and  the  results  tabulated  monthly  in  a 
form  convenient  for  comparison, as  shown  in  Specimen  No.  53. 
The  book  should  also  give  the  dates  on  which  the  wagons 
or  vans  are  tared.  There  are  considerable  variations  in 
tare  owing  to  weather  and  other  causes,  and  it  is  desirable 
that  the  weight  of  the  vehicle  itself  should  be  verified  from 
time  to  time.  The  cost  of  maintenance  of  wagons  and  vans 
should  also  be  kept  in  the  same  book,  or  in  a  Wagon 
Expenditure  Book.  In  either  case  the  amount  provided  or 
written  down  yearly  for  depreciation  and  obsolescence 
should  be  included.  The  financial  results  of  the  working 
of  the  wagons  and  vans  would  then  be  obtainable  in  detail. 

When  wagons  or  vans,  belonging  to  manufacturers  or 
merchants,  have  to  be  repaired  on  the  railway  company's 
sidings  by  a  wagon-repairing  company  or  by  the  railway 
company's  workpeople,  it  is  advisable  to  keep  a  record  of 
such  repair  in  a  Wagon  Journey  Repairs  Book  (Specimen 
No.  54).  In  large  establishments  better  utilisation  of 
wagons  and  vans  and  theavoidance  of  demurrage  charges  can 
be  brought  about  by  the  use  of  tabulating  boards  or  tables 
so  constructed  that  by  means  of  indicating  tablets  and  pins 
the  position  of  any  wagon  or  van,  and  the  length  of  time  it 
has  been  in  that  position,  may  be  known  from  hour  to 
hour  by  the  head  or  controller  of  the  wagon  department. 

It  may  also  be  serviceable  to  allude  briefly  to  the 
desirability,  where  steam  lighters  or  barges  are  used,  of 
recording  the  work  done  by  each  lighter  or  barge,  so  that 
full  advantage  may  be  taken  of  any  possible  economies  in 
cost  of  transit. 

The  captain  or  hand  in  charge  of  each  craft  should  be 
given  a  Time  Sheet  (Specimen  No.  55). 


TIME   SHEET   FOR   LIGHTER,    ETC. 


215 


The   Time   Sheet  may  be  so  ruled  on   the  back  as  to 
permit   of  the    recording   thereon    of  any   back    freights, 

Specimen  No.  54. 
WAGONS  REPAIREE)  BY  


No. 

Dates. 

Station 
or  siding. 

Materials 
sent. 

Nature  of 
Repairs. 

Carriage  on 
Materials. 

Charges. 

Ad- 
vised. 

Re- 
paired. 

Specimen  No.  55. 

(  LIGHTER. 
TIME  SHEET  FOR     BARGE. 
BOAT. 


Name 

of 
Craft. 

Date 

and 
Time  of 
leaving 
Works. 

Loaded 
with 

Quan- 
tity. 

Desti- 
nation. 

Date  and 
Time  of 
Arrival  at 
Desti- 
nation. 

Date 
and 

Time 
Dis- 
charged. 

Date  and 
Time 
started 
Return 

Journey. 

Date  and 
Time  of 

arri%al  at 
Works. 

return  cargoes,  towage,  or  other  services  performed,  and 
will  form  the  voucher  on  which  payment  will  be  made  by 
the  cashier  of  the  amount  due  to  the  crew  when  the  journey 
is  finished. 

This  Time  Sheet  should  be  recorded  in  a  Craft  Register 
(Specimen  No,  56). 


2l6 


SUBSIDIARY   BOOKS. 


This  Register  may  also  usefully  contain  a  record  of  the 
earnings  of  the  craft  whether  from  the  carriage  of  raw 
material  to,  or  finished  products  from,  the  factory,  the 
carriage  of  goods  on  return  journeys  for  other  manufac- 
turers or  persons,  or  from  the  towage  of  other  craft  on  the 


THE 


Specimen  No.  56. 
CRAFT  REGISTER. 

CAPTAIN 


19 


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Particulars  of  Payment. 

waterways  navigated.  It  is  desirable  that  the  class  of 
earnings  as  well  as  of  expenditure  should  be  kept  distinct. 
The  cost  of  towage  of  craft  not  moved  by  steam  or  other 
motive  power  should  be  recorded  in  a  Towage  Book,  the 
cost  for  each  barge  or  other  vessel  being  kept  separately. 

In  cases  in  which  stores,  wharves,  or  warehouses  are 
used  for  the  storage  or  stocking  of  a  commodity  or  com- 
modities in  bulk,  it  is  found  to  be  of  great  assistance  in 
the  practical  administration  of  the  business  if  the  stocks 
on  hand  are  reported  on  a  diagrammatic  form,  which  shows 
the  position  of  the  various  component  parts  of  the  stock 
in  the  store,  the  wharf,  or  the  warehouse  relative  to  the 
loading  or  unloading  facilities  with  which  the  depot  is 
equipped. 


CASES   BOOK.  217 

In  dealing  with  the  question  of  transit  of  goods,  it  will 
be  well  to  point  out  that  casks,  cases,  containers,  skips, 
Packing  sacks,  bags,  barrels,  syphons,  tarpaulins,  and 
accounts.  sheets  for  the  packing  or  covering  of  goods 
should  be  considered  as  package  stock,  and  should  be 
registered.  In  some  cases  the  package  is  of  more  value 
than  the  contents.  The  cases,  tarpaulins,  sheets,  and  other 
forms  of  package  should  be  made  to  a  Stock  Order  No., 
and  credited  to  stock  in  the  same  way  as  any  other  articles, 
and  should  bear  distinctive  and  consecutive  numbers. 
Thus  a  cases  or  sheets  account  respectively  would  be 
debited  with  the  cost  of  each  case  or  sheet  sent  out,  and 
credited  with  all  charges  made  to  customers  under  these 
heads.  If  any  allowance  be  made  for  the  return  of  a 
case,  the  case  should  be  put  into  stock  at  a  figure  not 
exceeding  the  amount  so  allowed,  and  the  process  would 
be  repeated  until  it  was  no  longer  of  value  as  a  packing- 
case  but  merely  as  old  material. 

It  is  further  desirable  that  the  warehouseman  should 
keep  an  "empties,"  "cases,"  or  "returns"  book,  showing 
the  packages  sent  out  and  those  received  back,  in  order  to 
keep  an  effectual  check  upon,  and  prevent  the  loss  or  too 
rapid  multiplication  of  packages  of  various  descriptions. 
Credit  notes  issued  or  cash  paid  on  the  return  of  these 
coverings  should  be  systematically  recorded. 

This  register  should  always  be  open  to  the  inspection  of 
the  head  of  the  packing-case  makers'  department,  or  he 
should  be  advised  daily  by  the  warehouseman  of  the 
packing-cases  that  have  been  returned.  It  is  also  necessary 
that  the  storekeeper  should  carefully  record  all  the  packing- 
cases  received  by  him  from  suppliers  of  goods,  and  the 
dates  on  which  they  were  returned.  In  the  case  both  of 
Stores  and  Stock  the  cost  of  coverings  should  be  kept 
distinct  from  the  prices  of  the  raw  material  and  the  finished 


2l8  SUBSIDIARY   BOOKS. 

goods.  Provided  records  are  kept  of  their  receipt  or 
manufacture,  and  return  or  issue  respectively,  the  articles 
themselves  can  be  considered  as  constituents  of  Stores  or 
Stock,  and  dealt  with  on  the  same  principles  as  regulate 
transactions  in  other  articles. 

There  are  many  other  subsidiary  books  of  a  similar 
character,  the  need  for  which  will  arise  in  every  factory,  but 
their  detailed  description  is  outside  the  scope  of 
this  work.  Such  are  the  Coal  Test  Book  for 
recording  calorimetric  analysis,  the  Coal  Book  for  recording 
the  contracts  for  coal  and  deliveries  made,  as  well  as  the 
consumption  of  coal,  when  this  is  systematically  charged  to 
each  working  number,  as  explained  in  previous  chapters.  If 
this  procedure  be  adopted,  the  Coal  Book  may  contain  on 
the  debit  side  the  turn-out  weight  of  coal  received,  under 
the  heading  gross,  tare,  and  net,  and  be  compared  with  the 
entries  in  the  columns  of  weights  advised.  The  credit 
side  would  give  an  account  compiled  from  the  statement 
(already  referred  to)  showing  how  the  coal  has  been 
used.  The  difference  between  the  debit  and  credit  sides 
would  represent  the  balance  of  coal  on  hand.  The 
Coal  Book  and  accounts  may  usefully  be  summarised 
monthly  (Specimen  No.  57),  to  show  the  various  ele- 
ments in  the  price  at  which  it  was  bought,  and  is  also 
serviceable  for  checking  the  accounts  for  coal  supplied. 
The  record  of  the  weight  of  coal  and  the  truck  or  wagon 
containing  it  is  first  made,  both  as  regards  gross,  tare,  and 
net,  in  the  Weighing  Machine  Book  kept  at  the  Weigh 
House.  The  weights  of  all  vehicles  and  goods  passing 
over  the  Weighbridge  are  entered  in  this  book,  a  carbon 
duplicate  being  sent  to  the  office.  A  record  should  also  be 
kept  of  all  inspections  or  tests  of  weighbridges,  weighing 
machines,  or  weights,  whether  such  tests  are  made  by 
the  proprietor  or  by  a  firm  engaged  by  him  to  maintain 


COAL   BOOK. 


219 


and  test  such  weighing  apparatus.  Such  register  of  inspec- 
tion is  of  considerable  service  in  connection  with  any 
proceedings  under  the  Weights  and  Measures  Acts.  A 
somewhat  similar  service  is  performed  by  the  Machinery 
Examination  Register,  recording  the  dates  on  which  the 
various  machines  should  be,  and  were,  cleaned  and  inspected. 
There   are   also   the    Surprise  Visits   Book  recording  the 


Specimen  No.  57. 
SUMMARY   OF   QUANTITY   AND   COST   OF  FUEL   RECEIVED 

.  19 


DURING  THE  MONTH  OF 


Q   3 

^  1 

'S 

s 

o> 

Quan- 
tity. 

T.     C. 

2  V 

c 

3 

0 
Q 

a 

M           • 

%  go 

Net 
Amount. 

Re- 
marks. 

and  Elec- 
tricity 
Books. 


visits  at  irregular  periods  and  unusual  hours  of  the  princi- 
pals or  leading  officials,  with  notes  and  observations  as  to 
the  condition  of  affairs  at  the  time  such  visits  were  made. 
Gas,  Water,  and  Electricity  Meter  Reading  Books,  which 
Gas.  Water,  show  the  readings  of  the  various  gas,  water, 
and  electricity  meters  at  regular  periods,  and 
the  consumption  during  such  periods,  whilst 
by  the  aid  of  subsidiary  m.eters  the  consumption  in 
different  parts  of  the  factory  is  obtained  and  the  cost 
Precaution  localised.  There  is  also  the  Brigade  or  Fire 
against  Sire.  Hq^q  Book,  in  which  IS  recorded  the  periodical 
examination  of  the  hose  and  apparatus  for  the  extinction 
of  fire,  as  also  the  number  and  position  of  the  fire-buckets, 
the  names  and  addresses  of  the  men  (usually  those  resi- 


220  SUBSIDIARY   BOOKS. 

dent  near  the  works)  who  constitute  the  brigade,  and  the 
record  of  the  date  of  consent  of  the  owners  of  the  street 
mains  to  the  attachment  of  the  hose  pipes  in  case  of  need  ; 
the  Casualty  Book,  containing  records  of  acci- 
dents which  happen  in  the  factory  ;  the  Pat- 
tern Book,  containing  particulars  of  patterns  received  and 
issued,  in  which  each  pattern  is  referred  to  by  its  symbol 
or  number,  a  constituent  therein  being  the  office  number 
of  the  Drawing,  the  Patterns  Ledger  showing  the  original 
cost  of  each  set  of  patterns,  and  the  amounts  from  time  to 
time  written  off  such  cost ;  the  Delivery  Books,  for  obtain- 
ing carriers'  receipts  for  goods  ;  the  Visitors'  Book,  record- 
ing the  names  of  visitors  to  the  works,  the  dates  and 
purpose  of  such  visits,  with,  in  some  cases,  a  portion  of  the 
book  set  apart  for  the  autographs  of  distinguished  visitors  ; 
the  Stores  Delivery  Diary  or  Calendar  of  Deliveries  due, 
used  for  entering  the  due  dates  of  stores  ordered,  and  by 
daily  examination  leading  to  systematic  reminders  to 
suppliers  of  overdue  goods  ;  and  a  variety  of  other  books 
too  numerous  to  be  enumerated.  In  many  industries, 
especially  those  in  which  operations  are  influenced  by 
weather  or  atmospheric  conditions,  a  Weather  Chart  Book 
may  advantageously  be  kept,  recording  meteorological 
conditions  during  working  days. 

There  are  also  a  number  of  books  facilitating  the  working 
and  general  oversight  of  the  business  by  the  principal  or 
his  assistants,  which,  although  they  do  not  necessarily  form 
part  of  the  system  of  accounts,  afford  data  for  comparisons 
of  expenditure  in  different  periods  on  general  and  estab- 
lishment charges.  Among  such  books  may  be  mentioned 
the  Staff  Register,  containing  the  names,  addresses,  posi- 
tion, and  salaries  of  members  of  the  staff;  the  Stationery 
Register,  containing  a  record  of  the  quantities  and  qualities 
of  the  books,  forms,  prints,  and  papers  ordered,  with  the 


SICK   AND   PROVIDENT   FUNDS.  221 

names  of  their  suppliers,  and  the  costs,  with  the  reference 
numbers,  and  code  letters  or  symbols  appearing  on  the 
forms,  thereby  enabling  the  last  supplies  to  be  traced  ;  the 
Catalogues  Issued  Register,  chronicling  the  various  dates 
of  issue  of  catalogues,  and  the  names  and  addresses  of 
those  to  whom  they  were  issued  ;  the  Advertisement  Con- 
tract Register,  containing  particulars  of  contracts  entered 
into  or  orders  given  for  advertisements,  with  specimens 
of  the  advertisements,  and  the  rates  at  which  they  are  in- 
serted ;  the  Notices  Book,  containing  copies  of  all  notices 
issued  to  the  staff  or  members  thereof,  or  posted  in  the 
works,  with  regard  to  the  conduct  of  the  business ;  the 
Licences  Book,  recording  all  licences  taken  out  or  to  be 
taken  out,  whether  in  connection  with  the  storage  of  gun- 
powder or  other  explosives,  or  inflammable  oils,  for  the 
employment  of  male  servants  as  coachmen,  for  light  loco- 
motives, or  for  any  purposes  for  which  licences  have  to  be 
taken  out ;  the  Boiler  Inspection  Book,  containing  records 
of  the  inspection  of  the  boilers,  and  a  copy  of  the  report 
which,  under  the  Factory  and  Workshop  Act,  has  to  be 
entered  in  or  attached  to  the  general  register  of  the  factory 
or  workshop,  showing  the  result  of  such  inspection  by  a 
competent  person. 

A  reference  to  books  relating  to  sick,  provident,  super- 
annuation, and  similar  funds  might  be  looked  for  in  this 

chapter,  but  inasmuch  as  these  are  generally 
and  other       couducted  by  a  committee  of  those  interested, 

a  description  of  the  books  required  does  not 
fall  within  the  limits  of  this  volume.  For  the  convenience 
of  the  employees,  their  subscriptions  to  these  funds  may,  as 
described  in  Chapter  II.,  be  deducted  from  the  amounts 
due  to  them  as  wages,  but  at  this  point  the  connection  of 
the  funds  with  the  factory  books  generally  ends.  The  dis- 
posal of  the  amounts  deducted  from  the  wages  of  employees 


222  SUBSIDIARY   BOOKS. 

on  account  of  fines,  rests  of  course  with  the  principal,  in 
the  absence  of  any  other  arrangement  with  the  employees. 
If,  as  is  often  the  case,  they  form  a  contribution  to  the 
sick  fund,  the  necessary  entries  are  made  in  the  commercial 
books. 

The  books  which  have  to  be  kept  under  the  Factory  and 
Workshop  Act  also  require  to  be  mentioned.  We  do  not, 
Books  however,  consider  it  necessary  to  describe  them 

Factor^^  ^^  "^  detail,  as  all  registers,  books,  forms,  certifi- 
A*=**-  cates,  etc.,  prescribed  by  the  Secretary  of  State 

in  pursuance  of  the  Act  can  be  purchased  ready  for  use.* 
The  Act  deals  with  the  sanitary  conditions  of  factories 
and  workshops,  and  with  the  safety  of  the  workpeople, 
fixes  the  hours  of  work  and  of  meals,  prescribes  holidays, 
provides  for  the  education  of  children  employed  in  factories, 
requires  certificates  of  fitness  for  employment  to  be  ob- 
tained, and  contains  regulations  as  to  the  investigation 
of  the  cause  of  accidents.  The  Act  also  contains  condi- 
tions as  to  overtime,  night  work,  domestic  employment, 
etc.,  and  special  provisions  for  particular  classes  of  fac- 
tories and  workshops. 

It  is  also  desirable  that  one  or  more  of  the  responsible 
officials  at  the  works  should  be  well  posted  as  to  the  pro- 
visions of  the  Public  Health  Acts,  the  Notice  of  Accidents 
Act,  the  Trades  Boards  Act,  and  other  Parliamentary 
enactments  relative  to  labour,  as  also  in  the  bye-laws 
of  the  local  authorities  of  the  district,  particularly  those 
relating  to  the  emission  of  black  or  other  smoke,  and  as  to 
sanitation.  Copies  of  the  local  bye-laws  should  either  be 
posted  in  the  works,  or  supplied  to  the  foremen  or  leading 
hands.  Where  electricity  is  used,  the  regulations  issued 
by  the  Home  Office  with  regard  to  such  user  in  factories 

*  A  useful  summary  of  Government  Regulations  appears  in  "  Factory 
Administration  and  Cost  Accounts."     Elbourne.     The  Library  Press. 


BOOKS  REQUIRED  BY  FACTORY  ACTS.      223 

should  be  posted  in  the  offices  of  those  responsible 
for  such  regulations  being  effectually  carried  out,  as 
should  also  the  regulations  published  by  the  Home 
Office  under  the  Factory  and  Workshop  Act  (1901), 
as  to  the  use  of  locomotives  and  wagons  on  private 
lines  and  sidings. 


APPENDIX    A. 


NOMENCLATURE  OF  MACHINE  DETAILS. 

By  Oberlin  Smith,  President  of  the  Ferracute  Machine 
Company,  Bridgeton,  N.J. 

A  Paper  read  before  the  American  Society  of  Mechanical  Engineers, 
and  repri7ited  by  the  kind  permission  of  t/ie  Author. 

That  the  nomenclature  of  machinery,  and  of  the  tools  and 
apparatus  with  which  it  is  constructed  is,  in  this  country,  in  a 
state  of  considerable  confusion  scarcely  needs  demonstrating.  If 
we  look  from  an  international  point  of  view,  and  include  the 
other  English-speaking  countries — Great  Britain  and  her  colonies 
— the  confusion  becomes  worse  confounded.  A  reform  is  destined, 
in  due  time,  to  come,  doubtless  to  be  promoted  in  great  degree 
by  such  societies  as  ours.  This  reform  movement  cannot  be 
begun  too  soon,  and  should  aim  at  giving  brief  and  suggestive 
names  to  all  objects  dealt  with, — each  object  to  have  but  one  name, 
and  each  name  to  belong  to  but  one  object.  A  simple  method 
of  beginning  such  a  reform  would  be  a  common  agreement  among 
all  our  engineering  schools  to  use  each  technical  word  in  but  one 
sense,  and  with  no  synonyms.  A  lesser  field  of  reform  and  one 
which  hes  more  particularly  within  the  jurisdiction  of  individual 
manufacturers,  is  the  comparative  designation  of  a  number  of  sizes 
or  kinds  of  the  same  machine.  There  is  now  no  common  under- 
standing whether  a  series  of  sizes  shall  be  numbered  or  lettered 
from  the  largest  down,  or  from  the  smallest  up.  The  latter  is 
undoubtedly  the  most  natural  and  suggestive  method,  but  usually 
becomes  confused  by  want  of  careful  forethought  (when  starting  a 
series)  in  providing  "  gaps  "  for  the  insertion  of  future  sizes.  If  a 
numerical  series  has  been  already  started  and  become  commer- 
cially established,  the  only  systematic  way  to  insert  new  sizes 

Q 


226  iSroMENCLATURE   OF   MACHINE   DETAILS. 

(either  at  the  beginning  or  through  the  middle  of  the  series)  is  to 
use  fractional  numbers.  This,  though  awkward  in  sound  and 
appearance,  seems  to  be  the  only  means  of  suggesting  the  com- 
parative size  of  the  article  by  its  name.  The  use  of  arbitrary 
higher  numbers  between  the  other  is,  of  course,  worse  than  no 
numbers  at  all.  The  use  of  a  series  of  letters  does  not  supply  this 
fractional  loophole  of  escape,  the  euphony  of  A-and-a-half,  K-and- 
three-quarters,  etc.,  being  somewhat  doubtful.  Another  method 
in  much  favour  is  the  use  of  "  fancy"  names  such  as  "  Diminutive 
Giant,"  "  Eureka,"  "  Firefly,"  etc.  These  are  far  preferable  to 
confused  numbers  as  they  are  not  intended  to  convey  any  ideas 
between  manufacturer  and  customer,  and  admirably  succeed  in 
their  purpose.  All  this  is  a  very  difficult  subject  to  deal  with,  and 
one  in  regard  to  which  we  can  scarcely  hope  for  any  exact  system. 
We  can  but  point  out  to  manufacturers  two  general  principles  to 
be  followed  :  ist,  of  leaving  abundant  ^aps — that  is,  let  a  regular 
series  run  lo,  20,  30,  40,  etc.,  instead  of  i,  2,  3,  4,  etc. ;  and  2nd, 
of  using  the  smaller  numbers  for  the  smaller  objects.  The  second 
is  similar  in  idea  to  the  well-known  Philadelphia  house-numbering 
system,  which  has  worked  so  admirably  in  practice,  and  which  has 
been  copied  by  numerous  other  cities. 

The  two  foregoing  paragraphs  are  intended  respectively  as  but 
casual  allusions  to  the  technical  and  commercial  nomenclature  of 
machinery  in  general.  The  subject  is  too  elaborate  to  be  treated 
at  length  in  this  paper,  the  main  purpose  of  which  is  to  set  forth 
the  results  of  the  writer's  experience  in  establishing  a  system  of 
names  and  symbols  for  all  the  component  parts,  commonly  called 
"details  "  of  machines,  or,  in  fact  of  any  manufactured  articles. 

That  some  such  system  is  necessary,  no  engineer  who  has 
attempted  to  manufacture  machinery  by  the  modern  system  of 
duplicate  (or  approximately  duplicate)  parts,  will,  for  a  moment, 
question.  The  necessity  for  a  specific  name  for  each  piece,  which 
name  is  not,  never  has  been,  and  never  will  be,  used  for  any 
different  piece  of  the  same  or  any  other  machine,  is  evident,  simply 
for  purposes  of  identification.  This  identification  is  required  me- 
chanically at  almost  every  stage  of  production.  The  name,  or  a 
symbol  representing  it,  should  be  marked  upon  the  drawings,  the 
patterns,  and  the  special  tools  pertaining  to  each  piece,  and,  when 
convenient,  upon  the  piece  itself.  Commercially,  it  is  required  on 
time  cards  and  in  indexes  and  pattern  lists  and  cost  books  as  per- 
taining to  production.  Pertaining  to  sales  these  names  or  symbols 
must  appear  in  illustrated  price  lists,  and  in  orders  by  and  charges 


REQUISITES   OF   A   GOOD   SYSTEM.  22/ 

to  customers.  This,  our  modern  method  of  repairs,  by  selling 
duplicate  parts,  renders  imperatively  necessary. 

The  requisites  for  a  good  system  of  names  and  symbols  are  : 
ist,  isolation  of  each  from  all  others  that  did,  do,  or  may  exist  in 
the  same  establishment ;  2nd,  suggestiveness  of  what  machine, 
what  part  of  it,  and  if  possible,  the  use  of  said  part — conforming, 
of  course,  to  established  conventional  names,  as  far  as  practicable ; 
3rd,  brevity,  combined  with  simplicity.  Of  the  importance  of 
isolation  to  prevent  mistakes  and  confusion  ;  of  suggestiveness  to 
aid  the  memory ;  of  brevity  to  save  time  and  trouble,  it  is  hardly 
necessary  to  speak. 

Regardmg  the  systems  now  in  use  in  our  best  shops,  this  paper 
will  not  attempt  detailed  information.  It  is  understood  that  the 
names  are  more  or  less  scientifically  arranged ;  depending,  of 
course,  upon  the  amount  of  study  and  the  quality  of  the  brains 
that  have  been  expended  upon  them.  In  cases  where  symbols 
are  used,  supplementary  to  the  names,  they  usually  consist  of 
letters  or  numbers,  or  (oftener)  a  combination  of  both.  Many  of 
them  (both  names  and  symbols)  fail  in  symmetry  and  suggestive- 
ness, because  little  attention  has  been  paid  to  the  names  of  the 
machines  themselves,  as  regards  the  serial  consecutiveness  hinted 
at  in  paragraph  2nd.  The  quality  of  brevity  often  suffers,  severely, 
because  the  name  and  symbol  must,  in  most  cases,  each  have  the 
machine  name  prefixed,  to  secure  their  perfect  isolation.  The 
latter  quality  is  rarely  dispensed  with,  simply  because  the  manu- 
facturer's pocket  would  be  too  directly  touched  by  the  expensive 
resulting  mistakes.  A  perusal  of  some  machinery  catalogues 
which  give  detailed  lists  of  parts  is  very  harassing  to  a  systematic 
mind.  They  are  apt  to  derive  one  part  name  from  another, 
prefixing  the  latter  as  an  adjective  each  time,  until  some  such 
pleasant  title  as  "  lower-left-hand-cutting-blade-set-screw-lock-nut " 
is  evolved.  If  there  are  symbols  provided,  they  consist  of  some 
unknown  combinations  of  letters  part  way  down  the  list,  and  then 
change  to  arbitrary  numbers,  or  perhaps  to  nothing  at  all.  It 
will  often  be  noticed  also  that  no  particular  order  appears  to  be 
followed  in  numerical  arrangement,  similar  parts  being  scattered 
at  random  through  the  list. 

The  scheme  to  be  described  further  on  has  been  evolved 
gradually  from  the  experience  gained  in  managing  a  growing 
machine  business.  This  scheme  is  far  from  perfect,  and  is 
probably  inferior  to  others  which  have  not  been  made  public  ;  but 
it  seems  to  answer  the  purpose  aimed  at,  viz.,  a  comprehensive 
and  elastic  system  which  will  accommodate  itself  to  an  unlimited 


228  NOMENCLATURE   OF   MACHINE   DETAILS. 

growth  and  any  variation  in  quantity  or  kind  of  goods  manu- 
factured. This,  the  methods  we  first  tried  would  not  do,  being 
too  Hmited  in  their  scope. 

It  should  be  here  explained  that  the  word  "  we,"  as  just  used, 
refers  to  the  above-mentioned  machine  works,  with  which  the 
writer  has  long  been  connected  ;  and  the  scheme  in  question  will 
be  spoken  of  as  "  our  symbol  system."  To  further  define  terms  : 
"  machine  name  "  and  "  machine  symbol  "  refer  respectively  to 
the  name  and  symbol  of  the  whole  machine — or  other  article  of 
manufacture ;  for  it  will  be  noticed  that  the  system  is  applicable 
to  almost  any  products,  except  those  of  a  textile  or  chemical 
nature.  "  Piece  name "  and  "  piece  symbol,"  in  like  manner, 
refer  to  the  separate  pieces  of  which  the  whole  is  composed.  The 
terms  "  detail,"  "  part,"  and  "  piece,"  have  so  far  been  used 
synonymously.  It  is  doubtful  which  is  really  the  best  to  establish 
as  a  standard,  but  we  have  adopted  "  piece  "  as  best  expressing 
the  idea  of  one  piece  of  material,  reduced  to  the  last  condition  of 
subdivision.  In  our  practice,  exceptions  are  made  to  this  require- 
ment of  homogeneousness  in  such  cases  as  chains,  ropes,  belts, 
etc., — also  material  glued  or  welded  together — in  short,  anything 
which  may  (like  a  man)  be  called  one  piece,  because  it  is  not 
intended  ever  to  be  taken  apart.  The  character  for  equality  (  =  ) 
will  be  used  to  show  connection  between  a  name  and  its  symbol. 
A  brief  glance  at  the  history  of  our  system  shows  that  at  first  we 
(like  many  others)  hit  upon  the  plausible  idea  of  using  numbers 
for  machine  symbols  and  letters  for  piece  symbols.  The  numbers 
were  somewhat  "gapped,"  but  not  to  such  an  extent  as  we  now 
should  practise.  Examples  :  If  four  sizes  of  pumps  were  symbolled 
I,  2,  3,  and  4,  their  barrels  might  =  i-A,  2-B,  etc.,  and  their 
handles  =  i-B,  2-B,  etc.  If  the  next  product  made  was  a  series 
of  lathe  dogs,  they  would  probably  be  symbolled  11,  12,  13,  etc. 
Their  frames  would  =  ii-A,  12-A,  etc.,  and  their  screws,  ii-B, 
etc.  This  all  worked  beautifully  until  the  products  became  so 
complicated  as  to  contain  more  than  twenty-six  pieces  !  After 
tampering  a  little  with  the  Greek  alphabet  (which  seemed  calculated 
to  scare  our  new  workmen),  and  trying  to  use  a  mixture  of  small  and 
capital  letters  (which  looked  too  near  alike),  we  fell  back  upon 
the  clumsy  device  of  repeating  the  alphabet,  with  letters  doubled 
or  tripled. 

When  we  finally  abandoned  the  above  plan,  several  methods 
were  carefully  studied.  The  next  most  obvious  was  to  use  letters 
for  machines  and  numbers  for  pieces.  This  allowed  any  quantity 
of  the  latter,  but  limited  the  machine  to  twenty-six  even  with  no  gaps 


USE   OF   SYMBOLS.  229 

provided.  A  certain  modification  of  this  method  is,  perhaps,  more 
in  use  than  any  other  system,  In  it  letters  are  used  for  different 
sizes  or  styles  of  a  certain  kind  of  machine,  and  used  over  again 
for  some  other  kind  ad  infinitum.  This  answers  the  purpose, 
because  there  are  not  likely  to  be  more  than  twenty-six  varieties  of 
one  machine.  It  has,  however,  the  fatal  objection  of  requiring  the 
whole  machine  name  prefixed  to  each  symbol,  in  all  cases  where 
the  symbol  stands  alone,  and  does  not  happen  to  be  written  with 
the  others  of  the  set  in  tabular  form.  As  the  general  name  of  a 
machine  usually  consists  of  at  least  two  words,  a  complete  piece 
symbol  becomes  too  long  for  convenience  in  labelling.  Examples  : 
Force  pump,  K — 26  ;  Lathe  dog,  H — 2, 

Another  system  consists  in  using  numbers  for  the  machines  and 
numbers  for  the  pieces.  This  gives  isolation  and  brevity,  but  no 
suggestiveness.  A  serious  objection  to  it  is  the  danger  of  blurring 
the  numbers  together,  or  of  transposition  in  writing  or  reading 
them ;  also  in  the  fact  that  either  number  cannot  be  used  alone, 
as  it  can  in  the  case  of  letters  and  numbers. 

A  similar  system  to  the  above  consists  in  the  use  of  letters  for 
both  symbols.  It  has  the  same  disadvantages,  and  the  additional 
one  of  a  limitation  in  the  quantity  of  letters  at  disposal. 

Our  system,  as  finally  decided  upon,  is  as  follows  :  Machine 
names  and  piece  names  are  determined  by  the  designer,  in  general 
according  with  the  principles  already  pointed  out,  being,  of  course, 
made  as  brief  and  suggestive  as  possible,  with  no  two  machine 
names  alike,  and  no  two  piece  names  alike  in  the  same  machine. 
In  this  nomenclature  no  positive  laws  can  be  followed  but  those 
of  common  sense  and  good  English.  A  machi?ie  symbol  consists 
of  a  group  of  three  arbitrary  letters — capitals.  X  piece  symbol  con- 
sists of  an  arbitrary  ?mmber  and  follows  the  machine  symbol, 
connected  by  a  hyphen ;  thus  FPA-2  might  symbolise  the  force- 
pump  handle  before  alluded  to — smallest  size.  The  machine 
symbol  may,  be  used  alone  when  required,  as  EPA. 

As  thus  described,  these  symbols  fully  possess  the  qualities  of 
isolation  and  brevity.  To  make  them  also  suggestive,  some  atten- 
tion must  be  paid  to  what  letters  to  use.  In  practice,  we  aim  to 
make  the  first  two  letters  the  initials  of  the  general  name  of  the 
machine,  and  the  last  letter  one  of  an  alphabetical  series  whicn 
will  represent  the  sizes  of  the  machine.  An  example  of  this  is 
shown  in  the  symbol  for  the  smallest-sized  force  pump  EPA.  if 
there  is  any  chance  of  a  future  smaller  or  intermediate  size,  gaps 
should  be  left  in  the  ali)habetical  order.  This  "  initial  "  method 
cannot  always  be  strictly  followed,  because  of  such  duplicates  as 


230 


NOMENCLATURE   OF   MACHINE   DETAILS. 


FPA  for  force  pump  and  foot  press.  The  remedy  would  be  to 
change  one  initial  for  one  beginning  some  synonymous  adjective, 
that  is,  foot  presses  might  be  symbolised  TPA,  assuming  that  it 
stands  for  treadle  press.  Usually  the  least  important  machine 
should  be  thus  changed.  From  this  it  will  be  seen  that,  in  defining 
the  theory  of  this  scheme,  the  words  "  arbitrary  letters "  were 
purposely  used.  The  idea  is  to  make  the  system  thoroughly  com- 
prehensive. There  might  be  such  a  number  of  machines  having 
identical  initals  that  the  letters  would  be  almost  arbitrary.  In 
practice,  the  designer  can  usually  succeed  in  making  the  symbols 
sufficiently  suggestive. 

In  considering  how  many  letters  to  use  in  a  symbol,  considera- 
tions of  brevity  advised  two,  suggestiveness  three  or  four.  Two 
letters  did  not  allow  of  enough  permutations,  nor  indicate  well 
enough  the  kind  and  size  of  machine.  Three  seemed  amply 
sufficient  in  the  first  respect,  as  it  provided  over  17,000  symbols. 
If,  for  any  reason,  in  the  future  four  letters  should  seem  desirable, 
the  addition  of  another  would  not  materially  change  the  system. 
If  three  letters  hyphened  to  a  number  of  one,  two,  or  three  digits 
should  seem  bulky,  remember  that  this  symbol  can  stand  by  itself 
anywhere  and  express  positively  the  identity  of  the  piece.  Its  com- 
parative brevity  is  shown  by  comparing  the  second  and  third 
columns  of  the  following  table  (A).  In  the  different  lines  an  idea 
is  given  of  the  application  of  the  system  to  a  variety  of  products 
not  usually  made  in  any  one  shop. 

TABLE  A. 


ISt. 

2nd. 

3rd. 

4th. 

a 

5tb.    6th. 
0 

Full  name  of  machine  and 
piece. 

Our  Symbol 
for  it. 

Symbolic  name  as  often  used. 

P 

.a 
U 

U 

°> 
M 

6"    •    4'   Engine   lathe, 

spindle  head    .... 
No.  4  Power  Press,  frame 

EL  A— 4 
PPD— I 

Engine  Lathe,  A— 4   .     . 
Power  Press,  D — i      .     . 

4 
4 

13 
12 

9 

8 

7"  X   14"    Steam    Engine, 
crank  shaft       .     .     .     . 

SEG— 51 

Steam  Engine,  G — 51 

5 

14 

9 

Buckeye  Mowing  Machine, 
left  axle  nut     .     .     .     . 

MMD— 81 

Mowing  Machine,  D — 81 

5 

16 

II 

No.  3  Glass   Clock,  main 
spring 

GCC— 105 

Glass  Mantel  Clock,C— 105 

6 

20 

14 

One -hole    Mouse    Trap, 
choker  wire      .     .     .     . 

MTA— 3 

Wooden  Mouse  Trap,  A — 3 

4 

17 

13 

A  SYMBOL  BOOK. 


231 


FPL 


TABLE  B. 
No.  3  Foot  Press. 


Weight. 


0 

0 
u 

4) 

Same  as 

I 

2 

3 

4 

5 
6 

7 
8 

FFH-8* 

9 
10 

FPH-io 

21 

26 

FPJ-26 

1 
1 

Piece  name. 


Material. 


Frame      ....    Cast  Iron 

Gib      ... 

Side  Bar  .     . 

Front  Leg     . 

Back  Leg 

Treadle     .     . 

Lever  .     .     . 

Lever  Weight 

Pitman    .     . 

Clamp  Sleeve 

Lever  Pin      .     .     .    Steel . 

Treadle  and  Pitman 

Bolt       ....    Iron  . 


Rough 

weight 


220 
10 

45 
30 
40 

17 

85 

5 

12 

3 


Finished 
weight. 


200 

9 
40 

30 
40 

15 

80 

5 
10 

2 


Aggregate 
finished 
weight. 


200 

9 

40 
60 
40 

15 

80 
20 

ID 

4i 
i 

I* 


Table  B  is  a  specimen  of  part  of  a  page  of  our  "  Symbol 
Book,"  in  which  are  recorded  any  machines  which  have  arrived 
at  such  a  state  of  perfection  and  saleability  as  to  be  marked 
"  Standard  "  on  our  drawings. 

This  table  almost  explains  itself.  The  piece  numbers  in  ist 
column  do  not  have  the  letters  prefixed,  because  the  latter  stand  at 
the  top  of  the  column.  "  Same  as  "  means  that  the  piece  is  identical 
with  a  piece  belonging  to  some  other  machine,  and  can  be  manu- 
factured with  it.  If  it  is  common  to  several  machines  in  a  set, 
the  smallest  of  the  set  in  which  it  occurs  is  given.  The  "  quantity  " 
column  tells  the  number  of  pieces  of  a  kind  required.  The  last 
"  weight "  column,  added  upward,  shows  total  weight  of  machine. 
The  piece  numbers  are  "  gapped  "  after  each  kind  of  material  and 
also  at  the  ends  of  "  groups  "  as  described  further  on.  This  is  to 
allow  for  future  changes  and  additional  pieces ;  also  that  other 
nearly  similar  machines,  having  more  pieces,  may  in  general  have 
the  same  piece  numbers. 

The  order  in  which  the  pieces  are  numerically  arranged  cannot 
follow  positive  rules  in  all  cases.  In  our  list  of  instructions  (too 
long  to  be  here  quoted)  we  direct  a  classification  by  materials. 
In  each  class  we  group  pieces  of  the  same  general  character,  in 
regard  to  the  prevailing  work  to  be  done  upon  them,  and  in 
natural  "  machine  shop "  order  ;  i.e.,  first  planing,  then  drilling, 
or  boring,  then  turning.     We  also  aim  to  place  the  heaviest  and 


232  NOMENCLATURE   OF   MACHINE   DETAILS. 

most  important  pieces  first.  Between  each  group  we  *'  gap  "  the 
numbers. 

Regarding  position  in  naming  pieces,  we  assume  a  front  to  the 
machine  (where  the  operator  is  most  likely  to  be  placed),  and 
define  direction  tersely  as  "  forward,"  "  back,"  "  right "  "  left," 
"down,"  "up."  The  adjectives  of  position  prefixed  to  piece 
names  are,  of  course,  derived  from  these  words,  as  "  upper," 
"lower,"  etc.  A  perpendicular  row  of  similar  pieces,  say  five, 
would  be  rated  "upper,"  "second,"  "third,"  "fourth,"  and 
"  lower."  A  number  of  different-sized  pieces  of  similar  name  may, 
in  like  manner,  be  prefixed  "  smallest,"  "  second,"  "  third,"  etc. 

Before  closing,  a  brief  reference  to  certain  (two)  supplementary 
symbols  may  not  be  out  of  place.  One  is  a  small  letter  after  a 
piece  symbol  (as  FPL-21-a),  signifying  that  the  piece  is  obsolete, 
the  standard  FPL-21  having  been  altered.*  After  a  second 
alteration,  the  last  obsolete  piece  would  be  suffixed  "  b,  "  and  so 
on.  Thus  duplicate  pieces  of  old-style  machines  can  be  identified 
and  supplied  to  customers.  The  other  symbol  referred  to  is  to 
indicate  the  number  of  the  operation  in  the  construction  of  a 
piece,  and  is  written  thus  :  FPL-21-ist,  FPL-2i-2nd,  etc.  Its  use 
is  of  great  value  on  detail  drawings,  time  cards,  and  cost  cards.  It 
enables  any  operation  (no  matter  how  trivial),  on  any  piece  of  any 
machine,  to  be  identified  by  a  symbol  alone.  An  operation  we 
define  as  any  work  which  is  done  by  one  perso7i  at  one  time,  before 
passing  the  piece  along  and  commencing  upon  another. 

*  In  a  letter  to  the  authors,  Mr.  Oberlin  Smith  writes  :  "  I  have  not  yet 
changed  the  system  in  my  own  practice,  and  do  not  see  anything  which  I 
think  it  desirable  to  change  except  the  first  supplementary  symbol  mentioned 
in  the  first  part  of  the  last  paragraph.  The  principle  there  mentioned  is  not 
strictly  logical,  as  it  gives  the  same  symbol  to  a  piece  in  present  use  which  in  a 
previous  year  was  given  to  a  somewhat  different  one  now  obsolete.  This 
matter  I  intend  to  modify  somewhat,  but  have  not  yet  had  time  to  do  so." 


APPENDIX   B. 


THE  RATING   OF   FACTORIES   CONTAINING 
MACHINERY. 

As,  for  a  long  time,  questions  have  arisen  as  to  how  far  machinery 
and  plant  is  to  be  taken  into  consideration  in  estimating  the 
Questions  rateable  value  of  the  premises  in  which  the  business 
as  to  is    carried    on,  it   may  be  useful  to    give   a   brief 

rateabiUty.    outline  of  the  present  position  of  this  subject. 

The  assessments  originate  with  Overseers  of  the  Poor,  and 
assessment  committees,  and  in  practice  the  greatest  diversity 
■jijjg  prevails  in  computing  them.     When  there  are  a  few 

assessing  small  factories  in  a  district  the  value  of  the  machinery 
authorities,  jg  often  ignored  in  framing  the  assessment,  which  is 
in  such  cases  based  on  the  estimated  or  actual  net  rental  value,  as 
with  a  shop  or  dwelling-house.  In  districts  in  which  industry  is 
localised  the  assessing  authorities  often  take  the  capacity  of 
production  as  the  guide  to  the  assessment,  and  base  their 
Varying  computations  on  the  spindle,  horse-power,  or  other 
modes  of  common  factor  in  the  trade,*  whilst  in  many  instances 
assessment,  ^j^g  assessors  have  adopted  rules  originally  intended 
for  very  different  kinds  of  property,  or  formulated  entirely  new 

*  Such  an  assessment,  does  not  take  cognisance  of  the  wear  and  tear  of 
machinery  and  its  tendency  to  obsolescence,  and  thus  bears  unduly  and 
unfairly  against  those  factories  which  have  been  longer  established  than  their 
rivals,  and  are  already  burdened  with  older  t)pe  machinery.  In  a  pamphlet 
on  the  "  Incidence  of  Local  Taxation,"  Mr.  Hedley  states  that  in  1S83  the 
Hunslet  Union  Assessment  Committee  decided  to  disregard  the  law  laid  down 
by  the  High  Court  (in  the  Bishopswearmouth  case)  and  resolved  to  exclude 


234      RATING   OF   FACTORIES   CONTAINING    MACHINERY. 

modes  of  valuation.  This  want  of  uniformity  as  between  district 
and  district,  handicaps  certain  trades  in  the  one  as  compared 
with  similar  trades  in  the  other  district,  whilst  inequality  or 
uncertainty  of  allotment  is  unfair  as  between  individuals  trading 
in  the  same  district,  for  "  it  must  always  be  remembered  that  the 
real  end  and  object  for  the  assessment  of  property  is  not  to 
determine  as  a  mere  speculative  question  the  rent  at  which  it 
might  let  from  year  to  year,  but  to  bring  the  particular  property 
down  to  a  common  basis,  so  that  the  burden  of  the  poor-rates 
may  be  equally  borne  by  the  occupiers  within  the  parish.     This 

being  so,  it  does  not  seem  unreasonable,  when  any 
should  be  difficulty  arises  in  ascertaining  how  a  particular 
on  common  property  or  class  of  property  is  assessed,  that  reference 
basis.  should   be    made   to  the  rules  that   prevail   in  the 

valuation  of  ordinary  classes  of  property  in  the  parish.  Special 
properties  may  require  special  rules,  but  where  there  is  no  such 
necessity  the  occupier  of  property  has  a  right  to  have  applied  to 
his  occupation  the  principles  which  determine  the  rateability  of 
other  property."  * 

That  machinery  per  se  is  not  rateable  is  generally  admitted ; 
indeed,  any  other  conclusion  would  be  inconsistent  with  the  Act 

of  1840  by  which  personal  property  was  declared  not 
rateable.""*  ^^  ^^  rateable.     The  question  is  as  to  how  far  in 

factories  or  works,  the  machinery  is  to  be  taken  into 
account,  as  enhancing  the  rateable  value  of  the  hereditaments. 
The  law  on  this  point,  if  law  there  can  be  said  to  be,  is  to  be 

found  in  the  judge's  decisions  in  cases  of  appeals 
dec^ions        against  assessments^  and    these    decisions    have  so 

widely  differed  that  the  author  of  the  legal  text-book 
already  referred  to  admits  that  it  is  impossible  to  reconcile 
them,  whilst  many  factory  occupiers  believe  that  certainty  and 
equality  in  assessment  are  only  to  be  obtained  by  legislative 
definition  of  what  machinery  is  to  be  considered  in  the  assessment. 

machinery  from  the  assessment  of  the  works,  and  to  rate  all  engines  at  a 
uniform  rate  of  ^^4  per  horse-power.  And  he  adds,  "To  rate  all  engines  on 
a  uniform  rate  of  ;^4per  horse-power,  irrespective  of  whether  they  are  common 
engines  with  egg-end  boilers  and  a  few  feet  of  shafting,  or  high-class  engines 
with  tubular  boilers,  super-heaters,  and  many  yards  ol  shafting,  is  clearly  as 
unfair  and  unequal  as  it  would  be  to  rate  all  agricultural  lands  in  the  Union 
at  a  uniform  rate  of  ;^2  per  acre,  irrespective  of  whether  the  land  is  worth  £^i 
or  ;^5  per  acre." 

♦  "  A  Practical  Treatise  on  the  Law  of  Rating,"  by  E.  J.  Castle,  K.C. 
London  :  Stevens. 


LEGAL   DECISIONS.  235 

The  cases  referred  to  extend  over  the  last  hundred  years,  but 
only  four  of  these  need  now  be  taken  as  landmarks  of  the  subject. 
The  Phoenix  ^"  1866  the  assessment  of  the  Phoenix  Gas  Company 
Gas  Com-  was  appealed  against,  but  it  was  held  that  the  steam- 
pany  case,  engines,  boilers,  gasholders,  retorts,  and  purifiers  at 
the  works  and  the  mains  in  the  public  streets  added  to  the  per- 
manent value  of  the  freehold,  and  as  such  were  rightly  considered 
The  Hal-  ^^  '^^  assessment.  In  the  following  year,  however,  in 
stead  silk  the  case  of  a  silk  factory  at  Halstead  it  was  held  that 
factory  case,  looms  and  other  machines  merely  screwed  to  the 
floor  came  under  the  category  of  movable  fixtures,  and  were  not 
to  be  considered  in  the  assessment.*  In  1877-8,  however,  the 
late  Lord  Chief  Justice  Cockburn,  in  the  case  of  "  Laing  and  the 

Overseers  of  Bishopswearmouth,"  expressed  some 
ca^e  ^^"^      doubt  as  to  the  decision  in  the  Halstead  case,  and  with 

reference  to  the  case  then  before  the  Court,  said  :  "  This 
strikes  me  as  being  a  case  the  principle  involved  in  which  is  of 
very  considerable  importance,  in  which  I  should  hope  there  would 
be  a  final  and  binding  authority  upon  the  subject,  and  in  which  we 
may  have  to  consider  the  effect  of  these  cases  (the  cases  quoted  in 
the  argument),  which  perhaps  may  prove  to  be  somewhat  in  con- 
^n  flict  with  one  another."     In  this  instance  it  was  held 

important  that  the  lathes  and  machines,  for  planing,  driUing, 
decision.  punching,  and  riveting  were  properly  included  in 
the  assessment,  as  such  machinery,  though  some  of  it  might  be 
capable  of  being  removed  without  injury  to  itself  or  the  freehold, 
was  "  essentially  necessary  to  the  shipbuilding  business  to  which 
the  appellants'  premises  are  devoted,  and  must  be  taken  to  be 
intended  to  remain  permanently  attached  to  them  so  long  as  these 
premises  are  applied  to  that  present  purpose." 

In  1886  the  Court  of  Appeal  gave  a  decision  which  confirms  and 

*  Trade  fixtures  generally  (using  the  term  as  inclusive  of  both  removable 
and  permanent  fixtures)  are  said  to  be  both  theoietically  and  legally  rateable, 
but  the  practice  of  exempting  removable  fixtures  has  become  almost  universal. 
"The  law  is  that  they  are  part  of  the  premises,  and  pass  under  a  mortgage, 
and  a  tenant  is  allowed  to  remove  them  during  his  term,  not  in  the  same  way 
as  he  may  his  carpets,  but  only  because  the  Courts  were  induced  to  relax  the 
strictness  of  the  old  rules  of  law  in  order  that  the  commercial  interests  of  the 
country  might  be  enhanced  by  the  encouragement  given  to  tenants  to  employ 
their  capital  in  making  improvements  for  carrying  on  trade,  from  the  certainty 
of  having  the  benefit  of  the  expenditure  secured  to  them  to  the  end  of  their 
term." — "  A  Practical  Treatise  on  the  Law  of  Rating."  E.  J.  Castle,  K.C. 
London  :  Stevens. 


236      RATING   OF   FACTORIES   CONTAINING   MACHINERY. 

extends  that  given  in  the  case  of  Laing  v.  the  Overseers  of  Bishops- 
wearmouth.  This  decision  has  been  given  in  a  case  stated  for  the 
opinion  of  the  Court  by  the  Northumberland  Quarter 
re^eSt"^*  Sessions,  who  held  that  the  Tyne  Boiler  Works  Corn- 
decision  :  pany  had  been  rightly  assessed  to  the  relief  of  the  poor, 
The  Tyne        the  rateable  value  of  their  premises  being  arrived  at 

Boiler  ^y  ascertaining  the  gross   estimated  rental  which  a 

Works  case.  .    r  ,  •   1  111 

tenant  from  year  to  year  might  reasonably  be  ex- 
pected to  be  willing  to  give  for  the  use  of  them  (inclusive  of  the 
machinery  and  plant),  and  by  making  the  statutory  deductions 
from  such  rental.  The  premises  were  occupied  under  a  lease 
from  the  Corporation  of  Newcastle  upon-Tyne,  and  they  were 
described  as  being  rendered  suitable  for  boiler-making  by  their 
proximity  to  the  Tyne  and  as  containing  machinery  for  boiler- 
making,  part  of  such  machinery  being  affixed  to  the  soil,  but 
part,  such  as  a  hydraulic  riveting  machine,  two  hand-power 
travelling  cranes,  and  shear  legs  with  engine  and  boiler,  was  not 
attached  either  to  the  soil  or  the  buildmg  but  rested  by  their 
own  weight.  There  was  a  boiler  set  on  a  brick  seating  outside 
the  main  building,  and  the  main  engine  was  fixed  by  iron  screw 
bolts  to  masonry  foundations,  in  which  a  well  was  constructed  for 
the  fly-wheel,  and  other  machinery  was  affixed  by  bolts  or  brackets 
to  the  walls,  or  to  a  foundation  of  stone  or  cement.  As  to  the 
machinery  that  was  not  affixed  to  the  soil  or  building,  the  hydraulic 
riveting  machine  rested  upon  cement  or  stone  foundations,  the 
travelling  cranes  ran  along  the  whole  length  of  the  main  building 
on  rails  laid  on  balks  of  timber  resting  upon  brackets,  and  the 
shear  legs  were  placed  on  the  edge  of  a  timber  jetty  on  the  river. 
The  main  shafting  ran  along  the  entire  length  of  the  main  building, 
and  all  the  machines  were  worked  by  belts  from  the  main  shafting. 
All  the  machines  and  plant  belonged  to  the  Company,  and  were 
arranged  and  adapted  for  use  upon  the  premises  for  the  manufac- 
turing and  setting  up  of  boilers,  but  there  was  no  intention  of 
permanently  annexing  them  to  the  soil  or  premises.  Each  of 
the  machines  was  separate,  and  was  from  time  to  time  removed 
for  repairs  or  otherwise  without  injury  to  themselves  or  structural 
damage  to  the  premises,  the  object  of  the  attachment  described 
being  to  steady  the  machines  when  working. 

The  Divisional  Court  having  confirmed  the  order  of  the  North- 
umberland Quarter  Sessions,  the  Company  appealed,  with  the 
result  that  the  judgment  of  the  Queen's  Bench  Division  was 
affirmed.     The  Master  of  the  Rolls,  in  giving  judgment,  reviewed 


TVNE   BOILER    WORKS   CASE.  237 

the  various  prior  decisions  on  the  subject,  and  stated  that  the  rule 
might  be  laid  down  thus  : — Things  which  were  on  the  premises  to 
be  rated,  which  were  there  for  the  purpose  of  making 
A  rule  of  ^^^  which  made  the  premises  fit  as  premises  for  the 
particular  purpose  for  which  they  were  used,  ought 
to  be  taken  into  consideration  as  enhancing  the  rateable  value 
of  those  premises.  Anything  that  would  come  under  this  category 
would  pass  by  demise  as  between  landlord  and  tenant,  and  would 
as  such  be  rightly  considered  in  the  assessment.* 

In  1889  the  Chard  (Somersetshire)  Assessment  Committee  in 
assessing  lace  factories  took  into  consideration  the  lace-making 
machinery  on  the  premises.  The  assessment  was  appealed  against, 
and  the  amount  thereof  was  considerably  reduced  at  the  Somerset- 
shire Quarter  Sessions  :  the  Assessment  Committee  was  ordered  to 
pay  the  costs.  Against  the  reduced  assessment  appeals  were 
carried  to  the  Queen's  Bench  Division  and  the  Court  of  Appeal, 
and  in  these  appeals  the  original  question  as  to  the  rating  of 
machinery  />er  se  appears  to  have  become  ignored,  for  the  Chard 
Assessment  Committee,  after  a  decision  in  their  favour  in  the 
Court  of  Appeal,  suggested  a  compromise  by  which,  each  party 
paying  their  own  costs,  the  sum  in  dispute  should  be  equally 
divided.  The  manufacturers  accepted  the  compromise  offered, 
as  they  were  advised  that  the  reduced  assessment  would  represent 
the  rateable  value. 

In  similar  circumstances  the  Gloucester  and  Sunderland  Assess- 
ment Committees  have,  without  there  being  an  appeal  to  the 
Queen's  Bench  Division  or  Court  of  Appeal,  acted  on  the  lines  of 
compromise  carried  out  by  the  Chard  Committee. 

The  case  of  Crockett  and  Jones  v.  the  Northampton  Union, 
which  was  before  the  High  Court  in  1902,  referred  to  very  small 

•  The  case  is  thus  noted  in  the  Law  Times  of  December  4,  1886  : — "Poor 
Rate — Rating  of  Premises  used  for  a  particular  purpose — Chattels  on  the 
Premises—  Boiler  Works — -Machinery  and  Plant.  In  assessing  premises  to 
the  poor  rate,  the  question  whether  chattels  on  the  premises  are  affixed  to  the 
soil  or  not  is  not  an  absolute  test  in  determining  whether  or  not  they  are  to  be 
taken  into  account  as  enhancing  the  value  of  the  premises.  But  things  which 
are  on  the  premises  to  be  rated,  and  which  are  there  for  the  purpose  of  making 
them,  and  which  do  make  them,  fit  as  premises  for  the  purpose  for  which 
they  are  used,  ought  to  be  taken  into  account  for  rating  purposes.  Therefore 
the  machinery  and  plant  of  a  boiler  works  which  (whether  affixed  to  the  soil  or 
not)  is  essentially  necessary  to  the  carr)'ing  on  of  the  business  to  which  the 
premises  are  devoted,  and  which  is  intended  to  remain  upon  the  premises  so 
long  as  they  are  used  for  the  same  purpose,  ought  to  be  taken  into  account  as 
enhancing  the  value  of  the  premises." 


238      RATING   OF   FACTORIES   CONTAINING    MACHINERY. 

machines  used  in  the  manufacture  of  boots  and  shoes.  The 
premises  in  question  consisted  of  a  boot  manufactory  fitted  with 
two  classes  of  machinery,  the  first  class  consisting  of  gas  engine, 
boilers,  shafting,  etc.,  and  which  were  admittedly  part  of  the 
freehold  and  which  both  sides  agreed  were  to  be  taken  into  con- 
sideration in  arriving  at  an  assessment  of  the  premises ;  the  second 
class  is  what  is  usually  known  as  Tenants'  Machinery,  consisting 
chiefly  of  small  sewing  and  cutting  machines  necessary  for  the 
manufacture  of  boots  and  shoes,  none  of  the  machinery  being  so 
fixed  as  to  be  part  of  the  freehold.  Some  of  the  machines  did 
not  need  to  be  bolted  to  the  flooring,  but  were  steadied  by  putting 
the  footplates  under  wedges.  They  were  driven  by  power  from 
overhead  shafting  and  pulleys.  This  latter  class  the  Union 
Authorities  had  included  in  their  assessment  of  the  premises, 
whilst  the  appellants  contended  that  such  machines  were 
"chattels."  The  High  Court  held  that  the  Assessment  Com- 
mittee were  right  in  taking  the  second  class  machinery  into 
consideration  in  fixing  the  assessment,  and  that  the  rateable  value 
was  to  be  based  upon  the  suitability  of  the  premises  to  receive 
the  second  class  machinery,  and  on  the  fact  that  such  machinery 
was  on  the  premises. 

Throughout  the  judgments  in  the  Bishopswearmouth,  Tyne  and 
Northampton  cases,  there  seems  to  run  an  assumption  that  a  hypo- 
thetical tenant  might  give  a  higher  rent  for  premises 

The  decisions  ^  reason  of  his  having  the  opportunity  of  taking  the 
criticised.  ■'    ,  .  .       ,    ,°      .       KL,  ■    ■  1    i  1     ^ 

machmery  contamed  therem.    1  his  is  probably  true  as 

regards  motive  power  and  the  machinery  common  to  most  trades, 

which  is  generally  attached  permanently  to  the  premises,  and  these, 

on  account  of  being  so  furnished,  let  at  higher  rentals.    But  specially 

designed  machinery  can  only  increase  the    probable  rental,  and 

therefore  the  assessment,  if  the  premises  are  let  to  an  incoming 

tenant  carrying  on  the  same  trade  as  the  outgoing  tenant  and  by 

means  of  similar  mechanical  appliances,  and  in  that  case  part  of 

the  increased  rental  would  be  due  to  the  opportunity  of  entering 

furnished  premises,  and  part  to  the  opportunity  of  acquiring  by 

purchase  from  the  outgoing  tenant  some  of  the  machinery  which 

he  might  otherwise  remove.* 

The  decisions  referred  to  will  probably  so  intensify  the  confusion 

*  "  Trade  fixtures  attached  to  the  soil  are  to  be  taken  as  landlord's  property, 
subject  only  to  the  special  privilege  granted  to  the  tenant  who  has  put  them 
up  of  removing  them  during  his  tenure." — "  A  Practical  Treatise  on  the  Law 
of  Rating,"  by  E.  J.  Castle,  K.C. 


TYNE   BOILER  WORKS  CASE.  239 

in  the  minds  of  the  various  rating  authorities  with  regard  to  what 
is  and  what  is  not  to  be  considered  as  assessable,  as  to  lead  to 
useful  controversy  with  regard  to  what  should  and  what  should 
not  be  assessable,  and  eventually  to  legislative  enactment  on  the 
subject. 

In  view  of  these  varying  decisions  or  interpretations  of  the  law, 
and  the  uncertainty  and  want  of  uniformity  in  assessments,  a  Bill 
to  amend  the  law  relating  to  the  Rating  of  Machinery  was 
introduced  into  the  House  of  Commons  in  1885,  but  was  not 
proceeded  with  until  1893,  when,  owing  to  the  exertions  of  the 
National  Society  for  the  Exemption  of  Machinery  from  Rating,  a 
somewhat  similar  Bill  was  introduced  into  Parliament  to  amend 
the  law.  This  Bill  and  similar  Bills  have  been  carried  on  second 
reading  in  the  House  of  Commons  in  the  various  sessions  in 
which  they  have  been  introduced.  The  Royal  Commission  on 
Taxation  considered  the  subject  and  reported  in  igoi.  The 
Commissioners  favoured  an  alteration  of  the  law  in  the  sense 
proposed  by  the  Bill,  stating,  "  We  therefore  recommend  that  in 
estimating  the  rateable  value  of  any  hereditament  occupied  for 
trade,  business,  or  manufacturing  purposes,  there  shall  be  excluded 
from  the  assessment  any  increased  value  arising  from  machines, 
tools,  or  appliances  which  are  not  fixed,  or  are  only  so  fixed  that 
they  can  be  removed  from  their  places  without  necessitating  the 
removal  of  any  part  of  the  hereditament,  but  the  value  of  any 
machinery  or  plant  used  on  the  hereditament  for  producing  or 
transmitting  first  motive  power,  or  for  heating  or  lighting  a 
hereditament  should  be  included." 

On  December  18,  1905,  the  House  of  Lords  gave  judgment 
in  the  appeal  case  of  Kirby,  and  the  Assessment  Committee  of 
Hunslet  Union  and  others,  and  dismissed  the  ratepayers  appeal 
on  the  ground,  mainly  it  would  seem,  that  the  lower  Courts  had 
for  fifty  years  passed  successive  judgments  to  the  same  effect. 
This  was  the  first  time  the  question  had  been  raised  in  the  House 
of  Lords.  In  effect  it  was  in  this  case  held  by  the  final  Court, 
that  in  assessing  the  value  of  premises  used  as  engineering  works, 
the  value  of  user  of  the  machinery,  which  is  on  the  premises 
for  the  purpose  of  making  the  premises  fit,  as  such,  for  engineer- 
ing works,  must  be  taken  into  account  as  enhancing  the  value  of 
the  premises,  even  if  such  machinery  is  not  fixed  to  the  freehold 
by  physical  attachment  so  as  to  form  part  thereof. 

The  work  of  educating  public  and  parliamentary  opinion  on 
this  matter   has   been   ably  taken  up   by  the    Machinery  Users 


240      RATING  OF   FACTORIES  CONTAINING   MACHINERY. 

Association  who,  in  the  session  of  Parliament  in  1906,  introduced 
a  Bill  applicable  to  England  and  Wales  by  which  it  was  provided 
"  From  and  after  the  passing  of  this  Act  in  estimating  for  the 
purpose  of  any  valuation  list,  or  poor  or  other  local  rate,  the  gross 
estimated  rental  or  rateable  value  of  any  hereditament  occupied 
for  any  trade,  business,  or  manufacturing  purposes,  any  increased 
value  arising  from  machines,  tools,  or  appliances  which  are  not 
fixed  or  are  only  so  fixed  that  they  can  be  removed  from  their 
place  without  necessitating  the  removal  of  any  part  of  the  said 
hereditament  shall  be  excluded. 

"  Provided  that  the  gross  estimated  rental  of  any  such  heredita- 
ment shall  be  estimated  at  not  less  than  the  sum  at  which  it  might 
reasonably  be  expected  to  let  for  the  purpose  for  which  it  is  used 
on  a  tenancy  from  year  to  year  void  of  the  machines,  tools,  and 
appliances  which  it  might  reasonably  be  expected  would  be 
supplied  by  the  tenant,  if  the  tenant  paid  all  the  usual  tenants' 
rates  and  taxes  and  if  the  landlord  undertook  to  bear  the  cost  of 
the  repairs  and  insurance  and  the  other  expenses  (if  any)  necessary 
to  maintain  the  said  hereditament  in  a  state  to  command  such 
rent. 

"  Provided  also  that  the  terms  machines,  tools,  and  appliances 
for  the  purposes  of  this  Act  shall  not  apply  to  any  machinery, 
machine,  or  plant  used  in  or  on  the  hereditament  for  producing 
or  transmitting  first  motive  power,  or  for  heating  or  lighting  the 
said  hereditament." 

On  the  promise  of  the  Government  to  introduce  a  Valuation 
Bill  of  their  own  the  Bill  of  the  Machinery  Users  Association 
was  not  re-introduced  in  the  following  session,  and  in  the  opinion 
of  the  Association  no  favourable  opportunity  for  the  introduc- 
tion of  a  Bill  of  a  similar  proposal  presented  itself  till  1920. 
In  the  preamble  of  the  Bill  then  introduced,  it  was  declared 
that  doubts  have  arisen  as  to  how  far  machinery  is  to  be  included 
or  taken  into  consideration  in  estimating  the  value  for  purposes  of 
local  rates  of  hereditaments  occupied  for  any  trade,  business, 
or  manufacture,  that  the  practice  of  estimating  such  value  is  not 
uniform  throughout  England  and  Wales,  and  that  the  law  relating 
thereto  in  England  and  Wales  differs  from  that  in  force  in 
Scotland,  and  that  it  is  desirable  to  secure  uniformity,  it  should 
be  enacted  that — (i)  In  the  construction  of  any  enactment 
relating  to  the  gross  estimated  rental,  gross  value,  annual  value, 
rateable  value,  or  assessable  value  of  any  hereditament  for  the 
purpose  of  any  local   rate,  or  of  the  basis  or  standard   thereof, 


THE    BILL   OF    I906.  24 1 

or  of  any  valuation  list,  or  of  any  water  rate  or  water  rent,  the  word 
hereditament  shall  be  deemed  to  include  such  machinery  only 
as  is  fixed  or  attached  to  the  hereditament.  (2)  In  the  case  of 
any  hereditament  occupied  for  any  trade,  business,  or  manufac- 
ture, the  expression  "  fixed  or  attached  "  in  the  preceding  section 
shall  be  construed  as  applying  to  all  machinery,  machines,  or 
plant,  in  or  on  the  hereditament,  for  producing  or  transmitting 
first  motive  power  or  for  heating  or  lighting  such  hereditament, 
but  save  as  herein  provided  shall  not  apply  to  machine  tools  or 
appliances  which  are  only  so  fixed  that  they  can  be  removed 
from  their  place  without  necessitating  the  removal  of  any  part 
of  the  hereditament. 

Pending  settlement  of  the  question  it  may  be  serviceable  to 
enumerate  some  of  the  points  to  be  considered  before  agreeing 
to  or  dissenting  from  assessments. 

The  basis  of  assessment  on  factories  rented  from  year  to  year 
is  naturally  the  actual  net  rental  value.  Questions  only  arise  where 
the  occupier's  interest  is  that  of  a  freeholder  or  a  lessee 
as^*s**  °nt  ^°^  ^  term  of  years,  and  where  machinery  has  been 
*  erected  by  the  occupier  qua  occupier.  In  either  case 
the  basis  of  assessment  would  be  the  gross  estimated  rental 
which  in  a  particular  district,  under  ordinary  circumstances,  a 
tenant  from  year  to  year  might  reasonably  be  expected  to  give 
for  the  use  of  the  premises  inclusive  of  the  machinery  and  plant, 
with  the  deduction  on  account  of  maintenance,  repairs,  fire  insur- 
ance, and  any  charges  which  in  a  term  of  years  would  have  to 
be  met  before  profit  could  be  reckoned.*  In  the  case  of  fac- 
tories occupied  by  the  owner  it  should  be  remembered  that  the 
assessment  is  made  on  him  as  an  occupier,  and  that  he  should 
discriminate  between  his  dual  interests.  Whilst  calculations  on 
the  basis  of  the  capital  sunk  in  the  building  and  on  his  plant, 
and  the  interest  thereon,  are  aids  in  checking  the  estimated 
rental  that  would  be  receivable,  they  cannot  be  considered  as 
final,  or  as  yielding  a  basis  of  assessment,  owing  to  numerous 
accidental  circumstances,  such  as  the  increase  or  decrease  in 
the  value  of  ground  -rents,  and  of  variation  of  cost  in  the 
construction  of  new,  or  structural  alteration  in,  old  factories. 

The  same  basis  of  assessment  is  often  applied  to  the  rating 

*  This  deduction  should,  in  our  opinion, include  a  provision  for  obsolescence. 
All  machinery  is  of  a  changeable  nature,  and  provision  has  constantly  to  be 
made  for  its  going  out  of  fashion. 

R 


242      RATING   OF   FACTORIES   CONTAINING    MACHINERY. 

of  workshops,  using  that  term  as  distinctive  of  places  where 
production  is  not  made  for  profit,  but  where  pro- 
asscs-^'cnt*  duction  Or  repairs  are  effected  for  the  sole  use  and 
on  work-  benefit  of  the  occupiers.  In  this  category  fall  the 
°'**'  shops  of  railway,  gas,  tram,  water,  and  similar  under- 

takings, as  also  national  and  municipal  workshops. 

Aid  in  checking  that  portion  of  the  assessment  which  may 
be  said  to  be  on  account  of  machinery,  is  derivable  from  a 
Machinery  Ledger,  if  such  be  kept  (see  Chapter  VII.).  The 
value  of  the  machinery  that  would  pass  with  the  freehold  would 
be  ascertainable  from  it. 

The  statute  law  in  Scotland  as  regards  the  rating  of  machinery 
differs  from  that  of  England.  In  the  former  country,  the  main 
statutes  are  the  Lands  Valuation  Act  of  1854,  which  under  the 
term  "  lands  and  heritages "  includes  "  all  machinery  fixed  or 
attached  to  any  lands  or  heritages  "  as  liable  to  assessment,  and 
the  Valuation  Act  of  1902.  In  the  case  of  the  North  British 
Railway  Co.  (1887,  25  Sc.  L.  Rep.  4),  Lord  Fraser  held  that 
machinery  that  could  be  "  detached  without  destruction  to  itself 
or  injury  and  destruction  to  the  building,"  was  not  attached  and 
was  not  assessable. 

In  1894,  Lord  Wellwood  held,  in  the  case  of  Cowan  &  Sons, 
Limited,  that  such  machinery  was  assessable  provided  it  could 
be  shown  to  have  been  attached  to  the  premises  in  order  to  be 
permanently  or  quasi-permanently  used  in  that  position,  and  that 
the  buildings  had  been  altered  and  specially  adapted  to  the  use 
of  the  machinery,  and  would  require  to  be  reconstructed  or  altered 
if  the  machinery  were  removed,  unless  replaced  by  machinery  of 
precisely  the  same  size  or  shape.  This  view  was  upheld  by  the 
Lands  Valuation  Appeal  Court  in  March,  1902,  when,  in  the  case 
of  James  Carmichael  &  Co.,  Limited,  it  was  held  that  machines 
in  an  engineering  foundry  attached  by  bolts  to  specially  prepared 
foundations  were  assessable.  Under  the  Act  of  1902,  machinery 
or  plant  for  "producing  or  transmitting  first  motive  power"  are 
rateable.  The  ambiguity  of  the  phrase,  "  first  motive  power,"  has 
led  to  several  appeals  against  assessments,  but  the  results  of  such 
appeals  have  not  on  the  whole  been  satisfactory  to  manufacturers. 

The  practice  by  which  surveyors  arrive  at  the  deduction  to  be 
made  from  the  gross  to  produce  the  rateable  value,  varies  in 
different  districts,  and  with  different  surveyors.  It  is  of  consider- 
able importance  to  the  occupiers  of  factories,  however,  to  see  that 
they  are  obtaining  the  full  abatement  to  which  they  are  entitled. 


ANNUAL   VALUE   OF   MACHINERY.  243 

In  London,  by  the  Statute  of  1869,  the  maximum  deduction 
is  one-third,  and  this,  in  cases  where  the  gross  value  of  the 
machinery  is  small  relatively  to  the  value  of  the  lands  and  build- 
ings, may  lead,  where  varying  rates  of  deduction  are  allowed  on 
land,  buildings,  and  machinery  respectively,  to  the  anomaly  of  a 
property  containing  machinery  being  assessed  at  a  lower  rateable 
value  than  a  similar  property  not  containing  machinery. 

The  London  Assessment  Conference  of  1904,  conscious  of 
the  anomaly  thus  produced,  adopted  the  suggestion  made  by 
Mr.  Harper,  the  statistical  officer  of  the  London  County  Council, 
that  as  a  working  rule  the  difference  between  the  gross  and 
rateable  value  should  be  computed  as  follows  : — 

1.  Arrive  at  the  gross  value  of  the  lands  and  buildings  in  the 
usual  way,  and  deduct  therefrom  the  usual  proportion  to  arrive 
at  the  rateable  value. 

2.  Arrive  at  the  gross  value  of  the  machinery  by  taking  a 
percentage  of  ten  per  cent,  on  the  capital  value,  and  deduct 
therefrom  a  portion  of  two-fifths  to  arrive  at  the  rateable  value. 

3.  The  total  of  these  two  deductions  will  represent  a  fair 
amount  to  be  deducted  from  the  gross  value  to  arrive  at  the 
rateable  value  of  the  hereditaments  as  a  whole. 

In  January,  19 14,  the  Machinery  Users  Association  (Incor- 
porated) established  a  rating  and  valuation  department  to  render 
advice  and  assistance  in  connection  with  rating. 


APPENDIX  C. 

TABLE  FOR  DETERMINING  AMORTIZATION  OF  LEASES,  &c, 
[For  examples,  see  page  250). 


Years  Pur. 

Years 

Pur. 

Years 

Pur. 

Years 

Pur. 

Years. 

Years. 

3  per  Cent. 

4  per 

Cent. 

5  per  Cent. 

6  per  Cent. 

1 

5 

•489 

i 

-485 

I 

•482 

1 

-479 

^ 

i 

I 

•971 

I 

•962 

I 

-952 

I 

•943 

I 

I 

I^ 

1-446 

l| 

1-438 

I^ 

I-4II 

li 

1-395 

ij 

I^ 

2 

1-913 

2 

1-886 

2 

I-S59 

t 

1-833 

if 

4 

2 

4 

2-374 

2i 

2-335 

2i 

2-297 

H 

2-259 

H 

3 

2-829 

2| 

2-775 

2| 

2-723 

3i 

2-673 

2f 

3, 

3i 

3-276 

3I 

3-207 

3| 

3f 

3-140 

3075 

3 

3l 

4 

3-717 

i 

3-630 

3-546 

3^ 

3-465 

3h 

4 

41 

4-152 

4-045 

4 

3-942 

4 

3-S44 

3l 

4i 

5 

4-580 

4? 

4-452 

4l 

4-329 

4i 

4-212 

4i 

5 

51 

5-002 

5 

4-851 

5^ 

4-707 

4f 

4-570 

4J 

l^ 

6 

5-417 

5i 

5-242 

5-076 

5 

4-917 

5, 

6 

6^ 

5-827 

sf 

5-626 

1* 

5-435 

'^h 

5-255 

^1 

6J 

7 

6-230 

b\ 

6-002 

6 

5-786 

5? 

5-582 

7 

n 

6-628 

^1 

6-371 

6^ 

6-129 

6| 

5901 

6 

7i 

8 

7-020 

7 

6-733 

6|- 

6-463 

6^ 

6-2IO 

6i 

8 

8i 

7-406 

7| 

7-087 

7 

6-789 

6| 

6510 

6| 

8J 

9 

7-786 

8? 

7-435 

7^ 

7-108 

7 

6S02 

6| 

9 

9| 

8-i6i 

7-776 

7f 

7-419 

7i 

7-035 

7 

9| 

10 

8-530 

82 

8-III 

8 

7-722 

7t 

7-360 

-1 

/4 

10 

10^ 

8-894 

9 

8-439 

8^ 

8-oi8 

8 

7-627 

71 

loi 

II 

9-253 

9\ 

8-760 

H 

8-306 

8i 

7-887 

8 

II 

"i 

9-606 

9\ 

9-076 

9 

8-588 

8^ 

8-139 

8i 

"^ 

12 

9-954 

10 

9-385 

9^ 

8-863 

8| 

8-384 

8| 

12 

14 

10-297 

loi 

9-688 

9f 

9-132 

9I 

8-622 

^ 

"J 

13 

10-635 

lOf 

9-986 

10 

9'394 

9i 

8-853 

8f 

13 

13^ 

10-968 

II 

10-277 

lOi 

9-649 

9f 

9-077 

9, 

13^ 

14 

11-296 

"J 

10-563 

10^ 

9-899 

10 

9-295 

9i 

9 

14 

14I 

11-619 

"^ 

10-843 

io| 

10142 

.oi 

9-507 

143 

IS 

11-938 

12 

ii-iiS 

II 

10-380 

lOj 

9-712 

9i 

•5 

15^ 

12-252 

I2i 

11-388 

11^ 

IO-6l2 

10^ 

9-912 

10 

15^ 

16 

12-561 

I2J 

11-652 

ii| 

10838 

lOf 

IOI06 

10 

lb 

l6i 

12-866 

I2I 

11-911 

12 

1 1  059 

II 

10-294 

lO; 

16^ 

17" 

13-166 

13? 

12-166 

12I 

11274 

Hi 

10-477 

10- • 

17 

I7i 

13-462 

I3i 

12-415 

12^ 

11-484 

I'l 

10-655 

ID; 

I7i 

18 

13-754 

13I 

12-659 

I2f 

11-690 

III 

10-828 

lOj 

18 

i8| 

14041 

14 

12-899 

13, 

11-890 

12 

10-995 

II 

18J 

19 

14-324 

I4f 
14I 

13-134 

I3J 

12-085 

12 

11-158 

"t 

19 

I9i 

14-603 

13-364 

I3i 

12-276 

12^ 

11-316 

"1 

i9i 

20 

14-877 

15 

13-590 

I3i 

12-462 

122 

11-470 

20 

DETERMINING  AMORTIZATION   OF   LEASES,   ETC.     245 


TABLE  FOR  DETERMINING  THE  AMORTIZATION  OF  LEASES,  &c. 
{For  examples,  see  page  250.) 


Years. 

Years 

Pur. 

Years 

Pur. 

Years 

Pur. 

Years 

Pur. 

7  per  Cent. 

8  per  Cent. 

9  per  Cent. 

10  per  Cent. 

Years. 

\ 

•475 

\ 

•472 

1 

•469 

i 

•465 

i 

1 
2 

I 

•935 

I 

•926 

I 

-917 

I 

-909 

I 

I 

I^ 

1-379 

li 

1-363 

li 

1-347 

H 

1-332 

'i 

I| 

2 

I -808 

if 

1-783 

2I 

1-759 

i| 

1-736 

If 

2 

2^ 

2223 

2I 

2-188 

2-154 

-4 

2-120 

2 

2| 

3 

2624 

4 

2-577 

2i 

2-531 

2| 

2-487 

2| 

3 

3i 

3-012 

3, 

2-952 

3, 

2-893 

3" 

2-836 

H 

3i 

4 

3-387 

l\ 

3-3'2 

l\ 

3-240 

3l 

3-170 

3i 

4 

4^ 

3-750 

3l 

3-659 

3-572 

3i 

3-488 

3* 

4h 

5 

4-100 

4 

3-993 

4 

3-890 

4 

3-791 

-.3 

J4 

5 

5J 

4-439 

4? 

4-314 

4i 

4-194 

4i 

4-080 

4 

5i 

6 

4-7t>7 

4f 

4-623 

4i 

4-486 

4i 

4-355 

4f 

6 

6^ 

5083 

5 

4-920 

5 

4-765 

4f 

4-6 1  s 

4i 

6i 

7 

5-389 

l\ 

5-206 

5i 

5-033 

5 

4-868 

4l 

7 

"1 
'  2 

5-685 

51 

5-482 

5i 

5-289 

5i 

5-107 

5 

71 

8 

5-971 

6 

5-747 

5J 

5-535 

5i 

5-335 

5? 

8 

^ 

6248 

6f 
^1 

6-002 

6 

5-770 

5| 

5552 

8i 

9 

6-515 

6-247 

6i 

5-995 

6 

5-759 

J4 

9 

9^ 

6-774 

6483 

6| 

6-2II 

6i 

5-956 

6 

9h 

10 

7-024 

7 

6-710 

6| 

6-418 

6| 

6-145 

6i 

10 

lOl 

7-265 

7i 

6-929 

7 

6-6i6 

6* 
6| 

6-324 

6| 

loi 

II 

7-499 

l\ 

7-139 

7i 

6  805 

6-495 

II 

"1 

7-724 

7i 

7-341 

if 

6-987 

7 

6658 

6f 

'4 

12 

7-943 

8 

7-536 

7-161 

"t 

6-814 

6| 

12 

I2| 

8-154 

8i 

7-723 

7f 

7-327 

7I 

6-962 

7 

I2| 

13 

8-358 

8| 

7-904 

8 

7-487 

7i 

7-103 

7 

13 

n\ 

8-555 

8-077 

8 

7  640 

7f 

7-238 

7i 

7l 

'3l 

14 

8-745 

8f 

8-244 

8| 

7-786 

7| 

7-367 

14 

Ml 

8-930 

9 

8-405 

7-926 

8 

7-489 

71 

14^ 

'5 

9-108 

9 

8-559 

8 -06 1 

8 

7-606 

7k 

15 

^l\ 

9-280 

9i 

8-708 

8f 

8-189 

8i 
8| 

7-717 

7t 

15I 

16 

9-447 

9i 

8-851 

8| 

8-313 

7-824 

7f 

16 

i6| 

9-608 

9| 
91 

8-989 

9 

8-431 

81- 

7-925 

8 

i6i 

17 

9-763 

9-122 

9 

8-544 

H 

8-022 

8 

17 

J  7^ 

9-914 

10 

9-249 

9i 

8-652 

8| 

8-II4 

8 

'7^ 

18 

10059 

10 

9-372 

9* 

93 

8-756 

8| 

8-201 

H 

18 

\^ 

I0-20O 

lOi 

icj 

9-490 

8-855 

8| 

8-285 

H 

18^ 

19 

10-336 

9604 

q| 

8-950 

9 

8-365 

8| 

19 

'9i 

10-467 

lo|  i 

9-713 

9| 

9-041 

9, 

8-441 

^1 

i9i 

20 

10-594 

lOl 

9-818 

9129 

9i 

8-514 

20 

246     DETERMINING  AMORTIZATION  OF  LEASES,   ETC. 

TABLE  FOR  DETERMINING  THE  AMORTIZATION  OF  LEASES,  &c. 

Continued. 


Yeari. 


Years  Pur. 
3  per  Cent. 


17-647 
17-877 
18-104 
18-327 
18-547 

18-764 
18-978 
19-188 
19-396 
19-600 

19-802 
20-000 
20-196 
20-389 
20-579 

20-766 
20-950 
21-132 
2I-3II 
21-487 

2I-66I 
21-832 

22-OOI 
22-167 
22-331 

22-492 
22-652 
22-808 
22-963 

23-"5 


Years  Pur. 

4  per  Cent. 


1 91 


X3-812 
14-029 
14-242 

14-451 
14-656 

14-857 
15054 
15-247 
15-436 
15-622 

15-804 

15-983 
16-158 
16-330 
16-498 

16-663 
16-825 
16-984 

17-139 
17-292 

17-442 
17-588 
17-732 
17-874 
18-012 

18-148 
18-281 
18-411 

18-539 
18-665 

18-788 
18-908 
19-027 

19-143 
19-256 

19-368 
19-477 

19-584 
19-690 

19-793 


13-799 
13-948 
14-094 

14-236 
H-375 
14-511 
14-643 

14-772 

14-898 
15-021 
15-141 

15-258 
15-372 

15-4H 
15-593 
15-699 

15-803 
15-904 

16-003 
16-099 
16-193 
16-285 
16-374 
16-462 

16-547 
16-630 
16-711 
16-791 

16-868 

16-943 
17-017 
17-089 
17-159 


Years  Pur. 
6  per  Cent. 


II-619 

11-764 
11-905 
12-042 
12-174 

12-303 
12-429 
12-550 
12-669 
12-783 

12-895 
13-003 
13-108 
13-211 
13-310 

13-406 
13-500 
13-591 
13-679 
13-765 
13-848 

13-929 
14-008 
14-084 
14-158 

14-230 
14-300 
14-368 
14-434 
14-498 

14-561 
14-621 
14-680 

14-737 
14-792 

14-846 
14-898 
14-949 
14-998 
15-046 


Years. 


DETERMINING  AMORTIZATION   OF   LEASES,   ETC.    247 

TABLE  FOR  DETERMINING  THE  AMORTIZATION  OF  LEASES,  &c. 

Cojttinued. 


Years. 

Years  Pur. 

Years  Pur. 

Years  Pur. 

Years  Pur. 

7perC 

ent. 

8perC 

ent. 

9  per  Cent. 

10  per  Cent. 

Years. 

20\ 

IO717 

io| 

9-919 

10 

9-212 

9\ 

8-583 

8^ 

20^ 

21 

10-836 

io| 

10-017 

10 

9-292 

8-649 

H 

21 

2'^ 

10-950 

II 

101 1 1 

10 

9-3^9 

9\ 

8-712 

H 

2'l 

22 

ii-o6i 

II 

10-201 

lOi 

9-442 

9| 

8-772 

H 

22 

22^ 

II-I68 

"i 

10-288 

loi 

9-513 

8-829 

8| 

22| 

23 

11-272 

"i 

10-371 

I0| 

io| 

9-580 

9J 

8-883 

9 

23 

23^ 

11-372 

"4 

10-451 

9-645 

9f 

8-935 

9 

23i 

24 

11-469 

III 

10-529 

10^ 

9-707 

9f 

8-985 

9 

24 

24 

11-563 

Hi 

10-603 

io| 

9-766 

9f 

9-032 

9 

24^ 

25 

11-654 

III 

10-675 

io| 

9-823 

9i 

9-077 

9 

25 

25i 

11-741 

ii| 

IO-744 

IO| 

9-877 

10 

9-120 

9 

25I 

26 

11-826 

iif 

io-8io 

io| 

9-929 

10 

9-161 

9i 

26 

26i 

11-908 

12 

10-874 

9-979 

10 

9-200 

9\ 
9i 

26i 

27" 

11-987 

12 

10-935 

10-027 

10 

9-237 

27 

27i 

12-063 

12 

10-994 

10-072 

10 

9273 

9i 

27h 

28 

12-137 

1 21 

11-051 

IO-II6 

10 

9-307 

9? 
9} 

28 

28i 

12-209 

I2i 

1 1- 106 

10-158 

io| 
lol 
loi 

9-339 

28| 

29 

12-278 

I2i 

11-158 

10-198 

9-370 

29 

29^ 

'2-344 

I2i 

11-209 

10-237 

9-399 

9\ 

29I 

30 

12-409 

12^ 

11-258 

I  ri 

10-274 

lOi 

9-427 

9\ 

30 

30^ 

12-471 

I2j 

"•305 

iii 

10-309 

loi 

9-454 

9h 

30^ 

31 

12-532 

12^ 

11-350 

1I4 

IO-343 

loi 

loi 

9-479 

9h 

3', 

3i| 

12-590 

I2I 

"•393 

11^ 

10-375 

9-503 

9? 
9i 

3'! 

32 

12-647 

I2| 

"•435 

"i 

10-406 

I05 

9-526 

32 

32i 

12-701 

I2f 

11-475 

"i 

10-436 

I02 

9548 

9j 

32| 

33, 

12-754 

I2| 

11-514 

Hi 

10-464 

io| 

9-569 

9? 

33 

33i 

12805 

I2| 

"•551 

III 

10-492 

io| 

9-589 

9* 

33i 

34 

12-854 

12| 

11-5S7 

1 1 J 

10-518 

io\ 

9-609 

9\ 

34 

34 

12-902 

13 

11-621 

"2 

10543 

loi 

9-627 

9f 

34i 

35 

12-948 

13 

"•655 

4 

10-567 

I05 

9-644 

9f 

35 

35^ 

12-992 

13 

11-686 

I  T^ 
'  '4 

10-590 

loj 

9-661 

9f 

35i 

3(> 

13-035 

13 

11-717 

Ilf 

10-612 

loi 

-9-677 

9: 

36 

36I 

13-077 

13 

11-747 

\\l 

10-633 

lol 

9-692 

9. 

36i 

37 

i3-"7 

13 

11-775 

10-653 

I  of 

9-706 

9. 
9:- 

37 

37i 

13-156 

i3i 

11-803 

"f 

10-672 

.lOf 

9-720 

37i 

38 

13-193 

I3i 

11-829 

'  '4 

10-691 

loj 

9-733 

9f 

38 

38^ 

13-230 

'4 

11-854 

'  '4 

10-709 

10  J 

9-745 

9. 

38^ 

39 

13-265 

I3i 

n-879 

12 

10-726 

I  of 

9-757 

9: 

39 

39i 

13-299 

nk 

11-902 

12 

10-742 

io| 

9-768 

9 

39^ 

40 

13332 

I3i 

11-925 

12 

10-757 

lOf 

9-779 

9: 

40 

248     DETERMINING  AMORTIZATION   OF   LEASES,    ETC. 

TABLE  FOR  DETERMINING  THE  AMORTIZATION  OF  LEASES,  &c. 

Contimied. 


Vears. 

Years  Pur. 
3  per  Cent. 

Years 
4perC 

Fur. 
ent. 

Years  Pur. 
5  per  Ceut. 

Years  Pur. 
6  per  Cent. 

Years. 

40j 

23-265 

23i 

19-894 

20 

17-228 

15-093 

15 

40^ 

41 

23412 

23I 

19-993 

20 

17-294 

i7f 

15-138 

'5^ 
i5t 

"^^ 

4H 

23-558 

23i 

20-090 

20 

17-360 

I  -1 

'/4 

15-182 

4'^ 

42 

23-701 

23f 

23I 

20-186 

20I 
20|- 

17-423 

I7i 

15-225 

'5i 

42 

42J 

23-843 

20-279 

17-485 

171 

15-266 

i5i 

42| 

43 

23-982 

24 

20-371 

20| 

'7-546 

'/2 

15-306 

I5:- 

43 

^^\ 

24-119 

24 

20-461 

20,- 

17-605 

15-345 

15- 

43^ 

44 

24-254 

244- 

20-549 

20.^ 

17-663 

'7r 

15-383 

15 

44 

44i 

24-387 

241 

20-635 

20| 
2o| 

17-719 

■7| 

15-420 

'5; 

445 

45 

24-519 

24i 

20-720 

17-774 

'  /  4 

15-456 

153 

45 

45^ 

24-648 

24I 

2O-S03 

20| 

17-828 

I7f 

15-491 

15^ 

45^ 

46 

2+-775 

24I 

20-885 

21 

17-880 

j8 

15-524 

153 

46 

46^ 

24901 

25 

20-965 

21 

17-931 

18 

15-557 

'5i 

46I 

47 

25025 

25 

21-043 

21 

I7-9«I 

18 

15-589 

i5i 

4^ 

471 

25-147 

25i 

21-1:0 

21 

18-030 

18 

15-620 

ijj 

47i 

48 

25-267 

254 

21-195 

21I 

18-077 

18 

15-650 

I5f 

48 

48^ 

25-3S5 

255 

21-269 

^^k 

18-123 

18 

15-679 

15;- 

48I 

49 

25502 

25^ 

21-341 

2ii 

18-169 

'l^ 

15-708 

15;- 

49, 

49| 

25-617 

25t 

21-413 

2>l 

18-213 

'l^^ 

15-735 

15:- 

49a 

50 

25-730 

25f 

21-482 

2i| 

18-256 

i8i 

15-762 

i5i- 

50 

51 

25-951 

26 

2i-6r7 

2li 

18-339 

181 

15-813 

i5i- 

51 

52 

26-166 

261 

21-748 

2l| 

18-418 

i8i 

15-861 

i5i- 

52 

53 

26-375 

26i 

2I-S73 

18-493 

i8| 

15-907 

16 

53 

54 

26-578 

26i 

21-993 

22 

18-565 

^^ 

15-950 

16 

54 

55 

26-774 

26| 

22-109 

22 

18-633 

iH 

15-991 

16 

55 

56 

26-965 

27 

22-220 

22I 
22I 

18-699 

i8| 
i8| 

16-029 

16 

S6 

57 

27-151 

27i 

22-327 

18-761 

16-065 

16 

57 

58 

27-33' 

27i 

22-430 

22i 

18-820 

i8f 

1 6-099 

16 

58 

59 

27-506 

27i 

22-528 

22i 

18-876 

19 

16131 

I6i 

59 

(jo 

27-676 

27^ 

22-623 

22i 

18-929 

19 

i6-ibi 

I6i 

60 

65 

28-453 

28^ 

23-047 

23 

19-161 

19} 

16-289 

l6| 
i6| 

65 

70 

29-123 

29 

23-395 

231 

19-343 

194^ 

16-385 

70 

75 

29-702 

29f 

23-680 

231 

19-485 

19^ 

16-456 

16| 

Z5 

80 

30-201 

30i 

23-915 

24 

19-596 

19I 

16-509 

16^ 

80 

85 

30-631 

30f 

24-109 

24 

19-684 

194^ 

16549 

I6i 

85 

90 

3 1  -002 

31 

24-267 

24J 

19-752 

I9f 

16-579 

i6| 

90 

95 

3'-323 

l^\ 

24-398 

H\ 

19-806 

I9| 

16-601 

95 

100 

31-599 

3>5 

24-505 

24i 

19-848 

1 91 

16-618 

i6| 

100 

Perp. 

33-333 

33i 

25-000 

25 

20-000 

20 

16-667 

i6| 

Perp. 

DETERMINING  AMORTIZATION  OF  LEASES,  ETC.     249 

TABLE  FOR  DETERMINING  THE  AMORTIZATION  OF  LEASES,  &c. 

Continued. 


Years. 

Years  Pur. 

Years 

Pur. 

Years  Pur. 

Years  Pur. 

7per  C 

ent. 

8perC 

ent. 

9  per  Cent. 

10  per 

::ent. 

Years. 

402 

n-i^i 

'4 

11-946 

12 

10-772 

10'' 

9-789 

9; 

40^ 

41 

13-394 

i3i 

11-967 

12 

10-787 

IO| 

9799 

9: 

41 

41^ 

13-424 

«3i 

11-987 

12 

10-800 

io| 

9-S08 

9i- 
9i- 

4i| 

42 

13-452 

•3l 

12-007 

12 

10813 

10^ 

9817 

42 

44 

13-480 

•3i 

12-025 

12 

10-826 

io| 

9-826 

9; 

42i 

43 

13-507 

i3i 

12-043 

12 

10-838 

io| 

9-834 

9t 

43 

43i 

13-533 

133 
I3a 

12-060 

12 

10  849 

lOf 

9-842 

9f 
9|- 
9| 

432 

44 

•3-558 

12-077 

12 

IO-86I 

io| 

9-849 

44 

44^ 

•3-582 

13I 

12-093 

12 

10-871 

lol 

9-856 

44 

45 

xybod 

132 

12-108 

12 

10-881 

11 

9-863 

n 

45 

45i 

13-628 

'31 

12-123 

12 

10-891 

9869 

91 

45i 

45 

13-650 

i3i 

12-137 

I2i 

10-900 

9-875 

10 

46 

46i 

13-671 

I3f 

12-151 

12| 

121- 

10-909 

9-881 

10 

46I 

47 

13-692 

I3f 
13I 

12-164 

10-918 

9-887 

10 

47 

47J 

13711 

12-177 

10-926 

9-892 

10 

47^ 

48 

13-730 

'31 

12-189 

'1 

i2i 
12! 

•0-934 

9-897 

10 

48 

48I 

13-749 

i3t 

12-201 

10-941 

9-902 

10 

48i 

49 

13-767 

i3f 

12-212 

10-948 

9-906 

10 

49 

49i 

13-784 

'4 

12-223 

I2i 

10-955 

9-911 

10 

49i 

50 

*i3-8oi 

•3? 

12-233 

i2i 

10-962 

9-915 

10 

SO 

51 

13-832 

'4 

12-253 

12! 
I2I 

10-974 

9-921 

10 

51 

52 

13-862 

I3t 

12-272 

10-985 

9-930 

10 

52 

53 

13-890 

14 

12-288 

10-996 

9-936 

10 

53 

54 

13-916 

14 

12-304 

I2| 
I2i 

1 1  -005 

9-942 

10 

54 

55 

13-940 

14 

12-319 

11-014 

9-947 

10 

55 

S^ 

13-963 

14 

12-332 

I2| 

11-022 

9-952 

10 

56 

SI 

13-984 

14 

•2-344 

I2| 
I2I 

11-029 

9956 

10 

57 

58 

14003 

14 

12-356 

11-036 

9-960 

10 

58 

59 

14022 

14 

12-367 

I2i 

11-042 

9-964 

10 

59 

60 

14-039 

14 

12-377 

I2i 

11-048 

9-967 

10 

60 

65 

14-110 

H 

12-416 

I2i 

11-070 

9-980 

TO 

65 

70 

14-160 

Mi 

12-443 

IH 

11-084 

9-987 

10 

70 

75 

14-196 

Mi 

12-461 

I2i 

11-094 

9-992 

10 

75 

80 

14-222 

Ml 

12-474 

I2i 

II-IOO 

J  . 

9-995 

10 

80 

85 

14-240 

Ml 

12-482 

^^l 

11-104 

9997 

lOi 

85 

90 

14-253 

Ml 

12-488 

I2J 

11- 106 

9-998 

10 

90 

95 

14-263 

mJ 

12-492 

•2^ 

11-108 

9-999 

10 

95 

100 

14-260 

12-494 

I2i 

11-109 

9-999 

10 

100 

Pel  p. 

14-286 

Mi 

12-500 

12^ 

ii-iii 

lOOOO 

10 

Perp. 

250      DETERMINING  AMORTIZATION   OF   LEASES,   ETC. 


Examples. 

The  foregoing  Table  is  reproduced  from  the  twenty-second 
edition  of  Inwood's  "Tables  for  the  Purchasing  of  Estates,  etc," 
by  kind  permission  of  the  publishers,  Messrs.  Crosby  Lockwood 
and  Son,  and  shows  the  annual  amounts  to  be  debited  to  Profit 
and  Loss  Account,  and  credited  to  account  of  Lease  or  other 
object  to  be  amortized  in  a  given  number  of  years  with  interest  at 
3)  4)  5)  6,  7,  8,  9,  and  10  per  cent,  per  annum.  The  table  is 
also  serviceable  for  ascertaining  the  value  of  a  Lease  at  the 
several  rates  of  interest.* 

Example: — A  Lease  or  Annuity  for  14  years,  to  make  3  per 
cent,  and  to  get  back  the  principal,  is  worth  11  "296  or  115  years' 
purchase  of  the  clear  annual  rent;  at  4  per  cent.,  io'563,  or  10^ 
years'  purchase:  at  5  per  cent.,  9'899,  or  10  years'  purchase;  at 
6  per  cent.,  9"295,  or  9^  years'  purchase.  In  calculating  the 
value  of  Annuities,  Leases,  etc..  Compound  Interest  is  always 
reckoned  and  allowed. 

A  hypothetical  Ledger  Account,  showing  the  amortization  of  a 
Lease  at  5  per  cent,  per  annum,  will  be  found,  with  a  description 
in  Chapter  VII. 

*  For  other  rates  of  interest  than  are  shown  in  the  Table  here  reproduced  < 
the  reader  may  be  referred  to  the  current  edition  of  "Inwood's  Tables" 
(London  :  Crosby  Lockwood  &  Son),  where  a  similar  Table  is  given,  but 
extended  to  many  more  rates  of  interest — 16  in  all  :  namely,  l|,  if,  2,  2^, 
2i,  2f,  3,  3i,  4,  4i,  5,  6,  7,  8,  9,  and  10  per  cent. 


GLOSSARY   OF   TERMS. 


GLOSSARY   OF   SOME    OF   THE   TERMS 

USED. 

The  definitions  do  not  extend  to  terms  used  in  quotations  or  in 
the  Appendices. 

Amortization. — The  process  by  which  provision  is  made  for  the 

expiration  of  value  in  an  asset. 
Appreciation. — The  increase  in  value  of  assets  either  through 

special  or  general  causes.     (Opposed  to  Depreciation,  g.  v.) 
Assets. — Property  of  all  kinds,  possessed  or  in  reversion  which 

can  be  applied  in  satisfaction  of  liabilities,  or  turned  into 

money  or  money's  worth.     (Opposed  to  Liabilities,  g.  v.) 
Balance    Sheet. — A  complete   summary   of  debit   and   credit 

balances  as  they  appear  in  the  accounts  in  the  Ledger  at  a 

given  date. 
Book  Value. — The  monetary  value  of  any  asset  according  to  the 

books  of  account.     (Distinguished  from  Market  Value,  g.  v.) 
Capital. — The  money  or  properties  invested  in   the  business. 

Assets  applied  to  production  of  further  wealth,  or  assets  used 

as  a  source  of  income,  or  set   aside  for  the  satisfaction  of 

future  needs. 
Cash  Books. — A  commercial  book  recording  the  cash   trans 

actions. 
Commercial  Books. — The  books  pertaining  to  the  counting- 
house,  such  as  the  Ledger,  Journal,  Cash  Book,  recording 

mercantile  transactions,  as  distinguished  from  Factory  Books 

treating  of  merchandise. 
Commercial  Ledger. — The  Mercantile  Ledger  (as  distinguished 

from  the  Stores,  Stock,  and  Plant  Ledgers). 
Cost  Journal. — The  book  in  which  adjusting  entries  as  to  cost 

are  made. 
Cost  Ledger — Cost  Book. — The  book  in  which  are  collected 

all  entries  relating  to  prime  cost,  and  to  cost  of  production. 
Cost  of  Production. — The  total  expenditure  incurred  in  the 

production  of  a  commodity. 


254  GLOSSARY  OF  TERMS. 

Counting-House. — The  place  in  which  the  mercantile  book- 
keeping is  conducted. 
Craft  Register. — The  book  recording  the  work  done  by,  and 

the  earnings  of,  each  of  the  Craft. 
Credit    Note. — If    received,    an    advice    of   indebtedness    to 

the   firm.     If  issued,   an   advice   of    indebtedness   by   the 

firm. 
Credit   Note  Register. — A  commercial   book   in   which  the 

credit  notes  received  are  registered. 
Day  Book. — A  commercial  book  in  which  the  sales  of  stock  are 

recorded. 
Delivery  Note. — A  request  to  receive,  and  a  description  of, 

material  tendered. 
Depreciation. — The   falling    off"   in    the  value    of   buildings, 

machinery,    plant,   and   other  assets.      (Distinguished   from 

Appreciation,  q.  v.) 
Dilapidations. — Those  defects  in  a  tenement  which  have  arisen 

from  neglect  or  misuse ;  and  of  use  or  age,  if  the  efficiency 

of  the  structure  is  destroyed. 
Establishment  Expenses — General  Charges. — The  general 

expenses  which  cannot  be  directly  charged  to  any  particular 

process  or  branch  of  a  business. 
Estimate  of  Cost. — A  calculation  of  the  probable  cost  of  a 

commodity. 
Factory. — The   place   in  which   manufacturing   operations  are 

carried  on. 
Factory  Accounts. — The  systematic  registration  for  purposes 

of  account  of  transactions  appertaining  to  manufacture. 
Factory  General  Charges. — The  general  expenses  incurred 

in  the  factory   which    cannot   be  directly   charged   to   any 

particular  Order  No. 
Factory  Order. — {See  Stock  Order.) 
Factory  General  Charges  Book. — The  book   in  which  the 

Factory  General  Charges  are  collected. 
Fixed  Capital. — That  part  of  the  capital  of  a  firm  which  con- 
sists of  the  instruments  of  production  of  a  more  or  less  per- 
manent character,  and  the  return  from  which  is  spread  over 

a  period  of  time. 
Fixed  Plant. — The  machinery  and  appurtenances  required  for 

the  purpose  of  manufacture,  and  permanently  located  in  one 

position  in  a  factory.      (Distinguished  from  Loose  Plant  and 

Tools,  q.  V.) 


GLOSSARY   OF  TERMS.  255 

Foreman. — A  superintendent  of  a  floor,  wing,  or  shop  in  a 

factory,  or  of  a  set  of  men. 
Fuel  Summary  Form. — A  form  summarising  the  various  items 

of  cost  in  the  delivered  price  of  fuel. 
General  Charges. — (See  Establishment  Expenses.) 
General  Stores  Account. — The  account  in  the  Commercial 

Ledger  in  which  the  receipts  and  issues  of  stores,  as  recorded 

in  the  Commercial  Books,  are  collected. 
Going  Concern. — A  business  the  efficiency  of  which,  for  the 

purpose  of  profit,  is  maintained. 
Goodwill. — The  value  pertaining  to  the  cHentUe^  or  interest  in 

the  business. 
Indirect  Expenses. — Outlays  not  directly  remunerative.     (Dis- 
tinguished  from   General   Charges   and  Establishment   Ex- 
penses, q.  V.) 
Indirect  Factory  Expenses. — Outlays  made  in  the  factory 

which  are  not  directly  remunerative.     (Distinguished  from 

Factory  General  Charges.) 
Inventory. — A  detailed  and  descriptive  catalogue  of  properties. 
Invoice. — If  received,  an  advice  of  indebtedness  by  the  firm. 

If  issued,  an  advice  of  indebtedness  to  the  firm. 
Invoice  Allocation  (or  Bought  Day)  Book. — A  commercial 

book  in  which  invoices  for  goods  purchased  are  entered  and 

analysed. 
Invoice  Register  Book. — A  commercial  book  in  which  the 

invoices  received  are  registered. 
Issue  Notes. — {See  Stores  Warrants.) 
Joint  Stock   Company. — An  association  of  individuals  who 

combine  by  the  subscription  of  capital  to  carry  on  a  business. 
Labour. — That  factor  in  the  cost  of  production  which  in  a  given 

trade   represents    the   work   of    adapting    materials    either 

manually  or  by  machinery. 
Leading  Hand. — The  senior  hand  of  a  floor,  wing,  or  shop  in  a 

factory,  or  of  a  gang  of  men. 
Liabilities. — The  debts  and  obligations  of  a  firm.     (Opposed  to 

Assets,  q.  v.) 
Loose  Plant  and.  Tools. — The  machinery,  tools,  and  appur- 
tenances temporarily  located  in  any  position  in  a  factory  for  the 

purpose  of  manufacture.  (Distinguished  from  Fixed  Plant,  ^.z^.) 
Magazine.— (6V<?  Stores.) 
Maintenance. — The  preservation   of  the   efficiency   of    fixed 

capital. 


256  GLOSSARY   OF  TERMS. 

Manufactory.— (&<f  Factory.) 

Manufacturing  Account. — The  Account  in  the  Commercial 
Ledger  which  shows  the  value  of  the  Stock  Orders  or  goods 
in  course  of  manufacture. 

Manufacturing  Order.— (6"^^  Stock  Order.) 

Market  Price. — The  price  at  or  about  which  all  other  similar 
commodities  are  being  sold  in  the  same  place.  (Dis- 
tinguished from  Book  Value,  q.  v.) 

Material — Stores. — That  factor  in  the  cost  of  production  which 
represents  the  raw  material  of  trade  employed  in  the  manu- 
facture of  commodities. 

Obsolescence. — The  process  by  which  an  article  before  it  is 
worn  out  falls  either  wholly  or  in  part  into  desuetude  in  a 
certain  trade,  and  as  a  result  is  no  longer  of  current  appli- 
cation in  that  trade. 

Order  Form. — An  instruction  to  a  vendor  to  supply  material  or 
do  work. 

Orders  Received  Book. — A  commercial  book  recording  the 
orders  received. 

Outworks  Time  Record. — A  form  used  by  employes  engaged 
outside  the  factory,  showing  how  their  time  has  been 
spent. 

Overlooker. — A  supervisor  of  labour. 

Overtime. — Time  worked  beyond  the  normal  period  of  employ- 
ment in  the  factory. 

Overtime  Book. — A  factory  book  in  which  the  timekeeper 
records  the  overtime  made. 

Overtime  Comparison  Book. — A  book  in  which  comparison 
is  made  between  the  cost  of  ordinary  time  and  overtime. 

Overtime  Return. — A  return  showing  the  overtime  worked  in 
the  factory  during  a  certain  period. 

Patents  Account, — The  account  in  the  commercial  books 
which  records  the  book  value  of  patents. 

Patterns. — The  types  to  and  from  which  articles  are  made. 

Petty  Cash  Book. — A  commercial  book  recording  small  cash 
transactions. 

Piece  Work. — Work  paid  for  by  the  piece  or  job.  (Dis- 
tinguished from  work  paid  by  time.) 

Piece  Work  Analysis  Book. — A  book  in  which  the  piece 
work  returns  are  analysed  and  a  comparison  instituted  as  to 
the  relative  value,  as  regards  the  product,  of  time  and  piece 
wages. 


■     GLOSSARY  OF  TERMS.  257 

Piece  Work  Return. — A  factory  form  used  by  employes  engaged 
on  piece  work. 

Plant. — The  machinery  and  appurtenances  required  for  the 
purpose  of  manufacture.  ( Vide  Fixed  Capital,  Fixed  Plant, 
Loose  Plant.) 

Plant  and  Buildings  Ledger. — A  book  in  which  are  collected 
all  entries  relating  to  fixed  and  loose  plant  and  buildings. 

Plant  Debit  Note. — A  factory  form  used  to  record  the  em- 
ployment of  plant. 

Plant  Debit  Summary. — The  form  on  which  Plant  Debit 
Notes  are  summarised. 

Prime  Cost. — The  original  or  direct  cost  of  an  article. 

Production  Order. — {See  Stock  Order.) 

Profit  and  Loss  Account. — The  statement  which  shows  the 
pecuniary  result  of  the  business  effected.  (Distinguished 
from  Revenue,  q.  v.) 

Railway  Rates  Book. — The  book  in  which  railway  rates  are 
recorded  under  the  headings  of  the  various  charges  making 
up  the  rate. 

Rate  Book. — {See  Wages  Rate  Book.) 

Raw  Material. — The  unadapted  materials  employed  in  the 
production  of  commodities  of  a  particular  trade.  The  manu- 
factured articles  of  one  trade  may  be  the  raw  materials  of 
another. 

Renewal.  \ 

Renovation.     >     {See  Maintenance.) 

Repairs.  ) 

Reserve  Fund. — A  provision  for  contingencies. 

Residual  Value. — The  ultimate  selling  value  of  assets  when 
worn  out  or  superseded. 

Retail  Warehouse. — The  repository  for  commodities  which 
have  been  purchased  from  the  makers  or  other  vendors  for 
reselling. 

Revenue. — The  gross  return  from  capital  employed.  (Distin- 
guished from  Profit  and  Loss,  q.  v.) 

Sales  Analysis  Book. — A  commercial  book  in  which  an 
analysis  is  made  of  the  sale  of  stock. 

Sales  Cancelled  Book. — A  commercial  book  in  which  the 
credit  notes  given  to  customers  in  respect  of  stock  returned 
are  entered. 

Scrap. — The  minimum  value  of  articles,  i.e.  the  price  that  may 
be  depended  on  for  waste  material. 

S 


258  GLOSSARY  OF   TERMS. 

Shop  Cost. — {See  Prime  Cost.) 

Shop   Returns   Book. — A  book   in  which   are   recorded   the 

Stores  Debit  Notes. 
Shop  Work  Order.— (.Si?^  Stock  Order.) 
Sinking   Fund. — A  fund  invested  in  order  to  provide  for  an 

eventual  loss  or  claim. 
Stock — Stock-in-Trade. — Those   commodities  which,  having 

been   manufactured   or   purchased,   are   on   hand   for  sale ; 

manufactured  commodities  on  hand;    contingently,  articles 

purchased  for  retailing.     (Distinguished  from  Stores,  g.  v.) 
Stock  Account. — The  account  in  the  Commercial  Ledger  in 

which  are  summarised  the  monetary  transactions  relating  to 

stock. 
Stock  Books. — Books  relating  to  the  receipt  and  issue  of  stock. 
Stock  Debit  Note. — A  factory  form  used  to  record  the  com- 
pletion of  articles  manufactured  for  stock,  and  their  transfer 

from  the  factory  to  the  warehouse. 
Stock    Issued    Book. — A   factory   book   in   which   the   stock 

requisitions  are  recorded. 
Stock  Ledger. — The  book  in  which  all  entries  relating  to  stock 

are  collected.     (Distinguished  from  Stores,  Plant,  and  Com- 
mercial Ledgers.) 
Stock  Order. — The  instruction  to  manufacture  commodities  for 

stock  and  to  record  the  expenditure.     (Distinguished  from 

Working  Order,  q.  v.) 
Stock    Order    No. — The   number   given   to   a   Stock   Order. 

(Distinguished  from  Working  Order  No.,  g.  v.) 
Stock  Received  Book. — A  factory  book  recording  the  receipts 

of  stock. 
Stock  Requisition. — A  form  used  to  record  the  withdrawal  of 

stock  from  the  warehouse. 
Stock  Returned  by  Customers  Analysis  Book. — A  com- 
mercial book  in  which  the  Stock  Returned  Debit  Notes  are 

analysed. 
Stock  Returned  by  Customers  Book. — A  factory  book  in 

which  the  Stock  Returned  Debit  Notes  are  recorded. 
Stock  Returned  Debit  Note. — A  factory  form  used  to  record 

the  return  of  stock  to  the  warehouse  by  customers. 
Stock-taking. — {See  Survey.) 
Stock   Uncompleted. — Articles  in  course  of  manufacture  for 

stock. 
Store. — The  repository  for  stores. 


GLOSSARY  OF   TERMS.  259 

Stores. — The  raw  material  or  partially  completed  articles  em- 
ployed in  manufacture  or  for  other  purposes.    (Distinguished 

from  Stock,  q.  v.) 
Stores  Account. — {See  General  Stores  Account.) 
Stores  Debit  Note. — A  factory  form  recording  the  return  to 

store  of  waste  or  surplus  material. 
Stores  Issued  Book. — A   factory   book   in   which   the  Stores 

Warrants  are  entered. 
Storekeeper. — The  officer  in  charge  of  stores.     (Distinguished 

from  Warehouseman,  q.  v.) 
Stores   Ledger. — The   book   in   which   all    entries  relating  to 

stores  are  collected.     (Distinguished  from  Stock,  Plant,  and 

Commercial  Ledgers.) 
Stores  Received  Book. — A  factory  book  in  which  the  invoices 

for  goods  purchased  are  entered. 
Stores  Rejected  Book. — A  factory  book  in  which  are  recorded 

all  the  credit-notes  received  from  vendors  of  goods  returned. 
Stores    Requisition. — A  requisition  from  the  storekeeper  for 

the  purchase  of  material. 
Stores  Requisition  Book. — The  book  in  which  stores  requi- 
sitions are  entered. 
Stores  Warrant. — A  factory  form  used  for  the  withdrawal  of 

stores. 
Survey — Stock-taking. — The  process  of  taking  an  inventory 

and   of  examining  the  condition,   etc.    of  properties.     {See 

Valuation.) 
Suspense  Account. — An  impersonal  account  in  the  Commer- 
cial Ledger  to  which  items  in  abeyance  are  charged. 
Symbolic  Nomenclature. — The   designation   by  symbols   of 

machines  and  parts. 
Time  Allocation  Book. — The  book  in  which  the  time  records 

are  entered,  and  in  which  their  apportionment  to  the  various 

orders  is  carried  out. 
Time  Book. — A  factory  book  used  by  the  timekeeper  to  record 

the  time  made  by  the  employe's. 
Time  Clerk. — The  clerk  who  enters  the  employe's'  records  of 

time,  and  analyses  the  same  under  the  various  working  orders. 
Timekeeper  or  Gatekeeper. — The  employe  whose  duty  it  is 

to  record  the  time  the  other  employe's  enter  and  leave  the 

factory. 
Time  Record. — A  factory  form  used  by  the  employe's,  recording 

how  their  time  has  been  spent. 


26o  GLOSSARY   OF   TERMS. 

Time    Sheet. — A   form   used  to  record  the  time  of  lighters, 

barges,  or  boats  on  their  journeys. 
Tools. — Instruments  or  implements  of  production  of  a  more  or 

less  permanent  nature. 
Tool  Order. — An  instruction  (subsidiary  to  a  Stock  Order)  to 

manufacture  tools,  and  by  means  of  which  the  cost  of  those 

to  be  used  in  the  manufacture  of  a  commodity  is  ascertained. 
Tool  Order  No. — The  number  given  to  a  Tool  Order. 
Trading    Account. — The  account  in  the  Commercial  Ledger 

which  represents  the  trading  transactions.     The  debit  side 

of  the  account  records  the  cost  of  stock  issued,  and  the 

credit  the  proceeds  of  sales. 
Transfer  Analysis  Book. — A  commercial  book  analysing  the 

transfer  from  stores  to  warehouse,  and  vice  versa. 
Transfer   Book. — A   factory  book   used    to  record  Transfer 

Notes. 
Transfer  Note. — A  form  employed  to  record  transfer  of  com- 
modities from  store  to  warehouse,  or  vice  versa. 
Unclaimed  Wages  Book. — The  book  in  which  are  entered 

the  names  and  wages  of  those  employes  who  are  not  paid  in 

regular  course. 
Valuation. — The  process  of  ascertaining  by  examination  and 

survey  the  present  and  prospective  value  of  properties  or  the 

earning  power  of  any  asset. 
Viewer. — The  examiner  of  manufactured  articles  or  parts. 
Wages. — Payment  for  labour. 
Wages  Account. — The  account  in  the  Commercial  Ledger  in 

which  are  collected  all  the  entries  relating  to  wages. 
Wages  Advice. — The  form  used  to  record  the  engagement,  or 

dismissal,  or  resignation  of  employe's,  any  alteration  in  their 

rates,  fines  levied,  or  premiums  allowed. 
Wages  Book. — The  book  which  records  the  amounts  payable  to 

each  employe'. 
Wages  Rate   Book. — The  book  in  which  the  rates  of  wages 

paid  to  employes  are  entered. 
Wagon  and  Van  Statement  Form. — The  form   on  which 

the  earnings  of  the  wagons  and  vans  are  shown. 
Wagon  Journey  Repairs  Book. — The  book   recording  the 

repairs  done  to  wagons  whilst  on  journeys. 
Warehouse. — The  repository  for  stock. 
Warehouseman. — The  custodian  of  the  stock.     (Distinguished 

from  Storekeeper,  q.  v.) 


GLOSSARY    OF   TERMS.  261 

Wear  and  Tear. — The  gradual  and  normal  deterioration  of 
plant  and  buildings. 

Working  Order. — An  instruction  to  expend  labour  and  material 
in  the  maintenance,  repair,  and  renewal  of  plant  and  build- 
ings, and  to  record  this  expenditure.  (Distinguished  from 
Stock  Order,  q.  v.) 

Working  Order  No. — The  number  given  to  a  Working  Order. 

Writing  Down — Writing-off. — The  process  by  which  the  book 
value  of  an  article  is  reduced. 


JUST  PUBLISHED 

Sixth  Edition,  Revised  and  Enlarged,  8^  x  6J. 
Strongly  Bound.      872  pages.      Price  25^.  net. 

THE    NUMBER,    WEIGHT,    & 
FRACTIONAL      CALCULATOR 

Containing  upwards  of  250,000  Separate  Calculations, 
showing  at  a  glance  the  Value  at  430  Different 
Rates,  ranging  from  yis^^  of  ^  Penny  to  20J. 
each,  or  per  cwt.,  and  ;^20  per  ton  ;  also  rates 
of  30J. ,  40^. ,  50J-. ,  6oj-.,  70J-.,  Soj. ,  90J-.,  and  looj. 
each,  of  any  number  of  articles  consecutively, 
from  I  to  470.  Any  number  of  cwts.,  qrs.,  and 
lbs.,  from  I  cwt.  to  470  cwts.  Any  number  of 
tons,  cwts.,  qrs.,  and  lbs.,  from  i  to  1,000  tons. 

By  WILLIAM   CHADWICK 


LONDON:   CROSBY  LOCKWOOD   AND  SON 


INDEX, 


A  BSEi^TEE  BOOK,  39 
-^-^      Accidents,  records  of,  220 

—  Act,  notice  of,  222 
Accountancy,  simple  form  of,  13 

—  and  accountants,  1-12 
Accountants,  and  commercial  ledger,  23 

—  accuracy  in  accounts,  20 

—  and  accountancy,  1-12 

—  and  technicians,  11 

—  broad  results,  I 

—  concentration  of  transfer  books,  171 
"  Accounting  of  Industrial  Enterprises," 

197 
Accounts,  accurate  adjustment  of,  16 

—  and  insurance,  144 

—  applicable  to  factories,  15 

—  assimilation  of,  24,  27,  206 

—  commercial,  24 

—  concentration  of,  24,  27,  206 

—  converging  of,  28 

—  depreciation  sometimes  ignored  in, 

132 

—  fundamental  principles  of,  15 

—  in  Government  factories,  202,  206 

—  in  municipal  workshops,  202,  206 

—  purchase  hire  system,  203 

—  statements  of,  77 

—  subdivision  and  localisation  of,  25, 

26,  27 

—  surveys,  183 

—  utility  of  system  of,  22 
Address  Book,  71 
Adjustment  Account,  123 


Administration,  8,  14 

Advertisement  Contract  Register,  221 

Advice  Note,  79 

Advice  to  Warehoiiseiiian,  173 

Agriculture,  13 

Algebraic  formulae  in  costing,  12 

Allowances,  58 

—  (see  Credit  Notes) 
Alterations  for  customers,  169 
Alverstone,  C.J.,  127 

American   Association   of    Public   Ac- 
countants, 197 
Amortisation,  definition,  253 

—  of  leases,  147,  14S,  149 

—  tables  for,  244-250 
Analyses,  qualitative,  11,  12 

—  quantitative,  II,  12 
Anderson,  Mr.  W.  H.  P.,  C.A.,  184 
Annuity  system,  150 
Antiquation  (see  Obsolescence) 
Appendices,  31,  225,  233,  244,  253 
Appreciation,  definition,  253 

—  direct  mode  of  determining,  135 

—  practical  view  of,  143 

—  reserve  fund,  143 
Approximation  in  Factory  Accounting, 

196 
Approval,  goods  on,  178 
Army  cost  accounting,  3 

—  Council,  3 
Arnold,  Mr.  H.  L.,  208 
Arsenals,  expenditure  in,  206 
Articles  (see  Commodities) 


263 


264 


INDEX. 


Ashley,  Professor  W.  J.,  18,  119 
Assessments  for  rating,  233 
Assets,  appreciation  of,  135 

—  available,  200 

—  capital  account,  143 

—  Companies  Act  of  1887,  200 

—  copyright  designs  as,  162 

—  definition,  253 

—  depreciation  of,  135 

—  determination  of  life  of,  147 

—  goodwill  and  patents  as,  162 

—  Income  Tax  Acts,  144 

—  opportunities    for     writing     down, 

2CX5 

— -  periodical  valuation  of,  135 

—  profit  and  loss  account,  143 

—  reserve  funds,  143 

—  sinking  funds,  143 

—  stock  as,  199 

—  stores  as,  200 

—  trade  marks  as,  162 

—  valuation  of,  in  going  concern,  135 

—  waste  of,  164 
Audit  and  surveys,  185 
"Auditors,  Their  Duties  and  Respon- 
sibilities," 148 

Auxiliary  capital,  5 

—  services,  9 

Automatic  time  recorders,  34 


BABBAGE,  Charles,  103,  104 
Bags,  217 
Bad  debts,  9 
Balance-sheets,  advantages  of  frequent, 

183 

—  definition,  253 

—  element  of  uncertainty  in,  removed, 

86 

—  special  assets,  162 

—  without  survey,  183 
Barber,  M.  R.  N.,  F.C.A.,  129 
Barge  Return,  214 

—  Time  Sheet,  215 


Barrels,  217 
"Basic"  value,  195 
Bins,  186 
Black  money,  56 

—  smoke,  222 

Board   of  Trade   Orders   and    Wages, 

62 
Boat  (see  Barge) 
Boiler  Inspection  Book,  22 1 
Bolton  V.  Natal  Land  and  Colonisation 

Co.,  Ltd.,  139 
Bond  V.  the   Barrow    Hematite   Steel 

Co.,  Ltd.,  140 
Book  gains,  and  writing  down,  200 
Book-keepers,  25 
Book-keeping,  art  of,  22 

—  basis  as  regards  stores  and  stock,  30 

—  cash,  19 

—  double  entry,  14 

—  economy  and  efficiency,  24 

—  fixed  capital,  126,  204 

—  fundamental  principles,  15 

—  labour,  32 

—  localisation  in,  24 

—  ordinary  commercial,  15 

—  prime  cost,  29,  100,  108 

—  purchase  hire  system,  203 

—  recording  production  and  distribu- 

tion, 165 

—  science  and  art  of,  23 

—  special  methods,  16 

—  stock,  165-182 

—  stores,  74-99 

—  surveys,  183-201 

—  treatises  on  general,  26 
Books,  concentration,  179 

—  exteriors,  27,  167 

—  merging  in  commercial  ledgers,  31 
Book  value,  definition,  253 

Boot  factories  and  piece  wages,  49 
Brewers'  accounts,  27 
Brigade  (Fire)  Books,  219 
Buckley,  Lord  Justice,  127,  139 
Builders,  timekeeping,  41 


INDEX. 


265 


Buildings,  depreciation,  144 

—  evidence  of  deterioration,  22,  127 

—  expectation  of  service,  147 

—  gross  and  rateable  value,  233-243 

—  insurance  of,  144 

—  interest  on  capital,  72 

—  leases  of,  147 

—  Ledgers,  106,  130,  149 

—  life  of,  147 

—  maintenance,  28,  105,  106,  126,  131 

—  repairs  and  renewals,  105,  126 

—  surveys  and  valuation  of,  135,  136 
Bundy  time  recorder,  37 

Burton,  Mr.  F.  G.,on  Depreciation,  159 
Business  appearing  profitable,  196 

—  conversion  of,  22 

—  development,  9 

—  disposal  of,  22 

—  expansion,  9 

—  improvement,  9 

—  man  of,  1 1 

—  management  and  cost  accounts,  i 

—  organisation  and  management,  12 

—  profit  or  loss  on  branches,  17 

—  volume  of,  204 
Buyer,  75 
Bye-laws,  222 
Bye-products,  98 


CALCULAGRAPH,  42 
Calendar  of  deliveries  due,  220 
Cambridge  Gas  Co.,  141 
Capital,  buildings,  and  machinery,  126 

—  auxiliary,  5 

—  circulating,  5-S,  127 

—  consumption,  5 

—  definition,  253 

—  expired  outlay,  159 

—  fixed  (see  Fixed  Capital) 

—  income  tax,  144 

—  interdependence    with    revenue  ac- 

count, 137-142 

—  loss  of,  137 


Capital,  maintenance,  and  depreciation, 

135 

—  purchase  hire  system,  203-206 

—  rating,  237 

—  reduction  of,  199 

—  repairs  charged  to,  131 

—  specialised,  5 

—  surplus,  142 

—  vehicles  and  horses,  209 

—  water  companies,  133 

—  working,  8 

Cards  as  records  of  expenditure,  26,  206 
Carmichael  &  Co. ,  Ltd. ,  and  rating,  242 
Carriage  of  goods,  77,  208 

—  law  of,  78 
Cartage,  203,  208,  210 

—  Advice,  209 

—  Book,  208,  209 

—  contractor  for,  208 

—  cost  of,  206 

—  gatekeeper's  check  on,  208 

—  goods  bought,  78,  80 
sold,  208 

—  incidence  of  cost,  20S 
Carters,  wages  of,  209 

—  Weekly  Returns,  209 
Carver,  Professor  T.  N.,  121 
Cases,  217 

Cash,  balance  of,  19 

—  book,  definition,  253 

—  discounts,  77 

—  purchase  hire  system,  203 

—  Sheet,  67 

—  wages,  68 

Cashier,  comparison  with  storekeeper, 
190 

—  wages,  32,  62,  67 
Casks,  217 

Castle,  Mr.  E.  J.,  K.C.,  on  rating,  227, 

234>  235,  238 
Casualty  Book,  220 
Catalogues  Issued  Book,  221 
Cathless,  Mr.  A.,  107 
"Changes  in  Trade  Organisation,"  18 


266 


INDEX. 


Chapman,  Professor  Sir  S.  J.,  21 
Character  Book,  71 

—  Form,  71 

Chard  Assessment  Committee,  237 
Charges,  Municipal,  9 

—  State,  9 
Charts,  122 

Chattels,  non-rating  of,  234 
Check  boards,  34 

—  boxes,  34 
Checks,  time,  34 

Chemists,  manufacturing,  accounts  of, 

27 
Children,  employment  of,  14,  222 

—  registers  of,  72 

Church,  Mr.  A.  Hamilton,  161 
Circulating  capital,  5-8,  127 
Classification  of  traffic,  211 
Cleaning  factory,  115 
Clerks,  24,  25,  58,  79 

—  invoicing,  175 

—  prime  cost  ledger,  109,  in 

—  salaries  and  prime  cost,  115 
Coachmen,  licences  for,  221 
Coal,  consumption  of,  9,  218 

—  Book,  218 

—  Contract  Book,  218 

—  factors'  accounts,  219 

—  measurement,  186 

—  Test  Book,  218 
Coefficients  in  cost,  1 1 
Commercial  books,  definition,  253 

—  —  external  transactions,  23 

—  —  factory  books,  23 
inadequacy  of,  23 

manufacture  and  sales,  166 

—  —  petty  cash  and  prime  cost,  109 
stores,  ledgers,  85 

—  —  stores'  warrants,  and  prime  cost, 

88 

substantiation  of,  22 

surveys,  183 

—  Ledger,  cash,  19 

converging  of  accounts,  28 


Commercial  Ledger,  definition,  253 

—  —  depreciation  of  stock,  203 

—  —  —  —  stores,  200 
leases,  148 

merging  of  departmental  books, 

24.  31 

retail  transactions,  180 

sale  of  stock,  166,  168 

securities,  19 

self-balancing,  124 

stock  account,  166 

— ■  debit  notes,  168 

—  —  stores,  30 
—  account,  108 

sundry  disbursements,  108,  109 

surveys,  179,  184,  186 

wages  account,  109 

Commission,  Royal,  on  Taxation,  239 
Commodities,    classes   of   expenditure, 
29 

—  cost  of  manufacture,  17,  113 

—  production  of,  29,  100-113 

—  sale  of,  30,  100,  165,  171-182 

—  wages  and  material,  16 
Communal  undertakings,  7 
Companies  Acts,  200 

"  Comparative   Depreciation    Tables," 

131 
Comparative  Cost  Register,  122 
Complaint  account,  96 
"Complete  Cost  Keeper,"  208 
Compounding  Rates,  73 
Containers,  217 
Consignment  ledger,  179 

—  notes,  211 

Consignments  and  surveys,  185 
Contingency  services,  9 
Contractors,  timekeeping,  39 
Contracts  Register,  78 

Cook,  Mr.,  130,  151 
Coopering  Factories  and  Piecework,  49 
Copyright  designs,  162 
Cost  accounting  and  cost  accounts  (see 
also  Factory  Accounts) 


INDEX. 


267 


Cost  accounts  (see   Factory  Accounts, 
also  Cost  Accounting),  2,  3,  12 

—  book  and   symbolic   nomenclature, 

226 

—  business  management,  I 

—  Journal,  114,  253 

—  Ledger,  definition,  253 

account  clerk  keeping  the,  102 

factory  general  charges,  108 

functions  of,  30,  98,  108 

goods  in  manufacture,  ill,  112 

indirect  charges,  120 

manufacture  of  parts,  104 

—  —  material,  88,  90,  94 

materials  in,  108-113 

parts,  105 

petty  cash,  109 

Petty  Cash  Book,  109 

plant  charges,  155-157 

—  —  pricing  stock  from,  110-112 
scientific  analysis,  1-12 

—  —  self-balancing,  199 
stock,  166 

—  —  —  account,  11 1 
time  records,  43 

valuations,  154,  155,  193-197 

wages,  ^2'  ^9>  'oo 

entries,  69,  108,  109 

—  and  expenditure,  6,  7 

—  and  prices,  2 

—  coefficient,  11 

—  conditional,  3,  4,  II 

—  constituent  demand  of,  3,  4 

—  of  production  2,  5,  8,  18 

— aggregated  and  recorded,  108 

definition,  253 

—  —  distinguished  from  prime  cost,  29 
employees'  rent,  73 

establishment  charges,  114,  153, 

195 

estimate  of  expenditure,  87 

increasing  output,  121 

Master  of  the  Rolls,  6 

material,  95 


Cost  of  parts,  loi,  102,  182 

—  —  pressure  to  minimise,  102 
prime,  5-7,  100-113 

—  —  qualitative,  11,  12 

—  —  quantitative,  11,  12 

—  —  Rail  way  and  Canal  Commission,  6 

—  —  relative,  6 

—  —  standing  charges,  22,  108,  194 
valuations,  193-201 

—  —  when  not  for  profit,  206 

—  —  working,  6 

—  supplementary,  5-7,  119 

units  of,  10,  1 1 

Costing,  2,  3,  7 

—  business  technique,  8 

—  distinct  function  of  accounting,  4 

—  Government  controls,  2 

—  methods  of,  2,  3 

Costs,  a  system  of  (see  Factory  Accounts) 

—  actual,  7,  125 

—  algebraic  formulae,  12 

—  apparent,  125 

—  comparison  of,  162 

—  definition,  30 

—  direct,  7 

—  factory,  125 

—  full,  7 

—  generic,  7 

—  historical,  125 

—  marketing,  29 

—  of  production,  8 

—  relative,  10,  1 1 

—  standard,  125 

—  systematic  compilation,  4 

—  total,  5 

—  true,  7,  125 

—  ultimate,  8 

—  various  kinds  of,  21,  28 
Cotton  mills,  96,  104 
Cotton-weaving    factories    and     piece 

wages,  49 
Counting-house,  check  on  excess  sup- 
plies, 192 

—  credit  notes  from  vendors,  92 


268 


INDEX. 


Counting-house,  definition,  254 

—  factory,  24 

—  forwarding  of  goods,  175 

—  invoice  allocation  book,  84 

—  invoices,  80 

—  invoicing  of  goods,  177 

—  records  of  depreciation,  157 

—  requisition  book,  76,  175 

—  retail  trading,  180 

—  sales,  167-178 

—  stock,  175 

—  stock  returned  debit  notes,  177 

—  stores  debit  note,  96 
Cowan  &  Sons  and  rating,  242 
Cowan,  Mr.  David,  208 
Craft  Register,  216 

definition,  254 

Credit  Notes,  definition,  254 

—  —  from  vendors,  92 

references  on,  92 

register,  92 

register,  definition,  254 

their  registration,  92 

—  —  to  customer,  167,  177 
Customers,  alterations  for,  169 

—  cartage  of  goods  to,  208 

—  delivery  of  goods  to,  211 


DAILY  maintenance,  out-workers, 
65 
Darbishire,  Mr.   J.    E.,  and  deprecia- 
tion, 159 
Davisson,  Professor,  16 
Day-book,  analysis  of  sales,  172 

—  definition,  254 

—  invoices  rendered,  167 

—  trading  account,  179 
Dead  expenses,  114 
Debts,  bad,  9 
Defective  products,  169 
Delivery  Books,  220 

Delivery  of  goods  from  vendors,  79 

—  to  customers,  211 


Delivery  Note,  8 1 ,  254 

Demurrage,  214 

Dent  V.  London  Tramways  Co.,  Ltd., 

139 
Departmental  cost  books,  24,  123 

—  transfer  books,  123 

—  transfers,  97 
Departments,  accounts  for,  23,  24 

—  depreciation  in,  135,  147 

—  localisation  of  cost  in,  24,  163 

—  subdivision  of,  24 
Depreciation,  accountant  and  engineer, 

157 

—  actual,  rarely  charged,  135 

—  annuity  system,  150 

—  building,  22 

—  classification  of  objects,  147 

—  cost,  2,  21,  29,  162 

—  definition,  254 

—  direct  method  of  determining,  135 

—  engines  and  boilers,  161 

—  factors  in  determining,  128 

—  fire  loss,  144 

—  fixed  capital,  127-145,  203 
instalment  principle,  148 

—  horse  account,  209 

—  ideal  way,  147 

—  Income  Tax  Acts,  144 

—  life  of  object,  133,  147 

—  loose  plant  and  tools,  152 

—  methods  in  vogue  of  charging,  135 

—  Mr.  Justice  Swinfen  Eady  on,  145 

—  of  factories,  127 

—  patterns,  152,  155 

—  periodical  valuation,  145 

—  plant,  22,  126-164 

—  purchase  hire  system,  203 

—  railway  companies'  accounts,  132 

—  rate  of,  132 
for  leases,  148 

—  ratio  between,  and  expenditure,  132 

—  stock,  30,  199 

—  stores,  30,  156,  159,  199,  200 

—  straight  line  system,  148 


INDEX. 


269 


Depreciation,  telephone  accounts,  134 

—  tools,  22,  152 

—  trucks  accounts,  213 

—  unskilled  labour,  136 

—  van  accounts,  210 

—  volume  of  trade,  135 

—  water  companies'  accounts,  133 

—  weather  exposure,  128 
Designer,  87 

Details    (machine),    nomenclature    for, 

225-232 
Deterioration  (see  Depreciation) 
Development,  business,  9 
Dey  time  recorder,  37 
Diagrams,  27 
Dick,  Mr.  John  R.,  12 
Dickinson,  Mr.  A.  Lowes,  20,  21,  196, 

199 
Dicksee,  Mr.  L.  R.,  19,  131 
Dilapidations,  152,  254 
Direct  goods  and  stores,  80 
Direction,  9 
Dirty  money,  56 
Discount,  172 
Distillers,  accounts  of,  27 
Distribution,  5 
Disturbances,  9 
Dividends,  capital  and  revenue  accounts, 

137-143 

—  depreciations,  132 
Dockyards,  accounts  in,  206 
Domestic  system,  23 
Double  account  system,  131 
Draughtsmen,  87 
Drawing  office  costs,  118 

Drawings  and  symbolic  nomenclature, 

225 
Dubois,  Mr.  C.  G.,  134 
"Dummy  men,"  33 


'ARNINGS,  management,  5 

,     —  task,  5 
—  time,  5 


Easements,  8 

Ebbw  Vale  Steel  and  Iron  Co.,  Ltd., 

139 
Economic  Arithmetic,  the  new,  121 
Eionomu- Journal,  18,  1 16 
Economics  and  accountancy,  5,  6 

—  of  actuality,  11 

"  Economics  of  Industry,"  49,  96,  104, 
119 

—  enlargement  of,  18 
Economists,  11,  12 

—  and  works  cost,  12 

—  division  and  specialisation  of  labour, 

103 

—  unproductive  workers,  16 
Economy  in  division  of  labour,  103 

—  of  "  Machinery  and  Manufactures," 

103 

—  specialisation  of  labour,  24 
Elbourne,  Mr.,  194,  222 

Electric   light   companies    and    double 

account  system,  131 
Electrical  regulations  in  factories,  222 
Electricity  costs,  9,  219 
Employees  absenting  themselves,  39 

—  address  book,  71 

—  addresses  of,  34 

—  allowances  to,  55,  56 

—  change  of  address,  71 

—  character  book,  71 

—  characters  of,  34 

—  confidence  in  accounts,  22,  32 

—  deductions  for  rent,  33,  72 

—  disabled,  62 

—  dismissal  of,  56 

—  disposal  of  fines,  221 

—  engaged  outside  factory,  33,  44,  45 

—  engagement  of,  56 

—  entr)'  and  exit,  34-36,  49 

—  factory  rules,  71 

—  fines  of,  33,  49,  56,  62,  222 

—  interdependence  of,  49 

—  leaving  work  at  irregular  times,  38 

—  length  of  service,  56 


270 


INDEX. 


Employees,  mode  of  paying  wages,  52- 
69 

—  moral  effects  of  accurate  accounts, 

22 

—  occupying  houses  of  firm,  35,  72 

—  overtime  minimised,  33,  45,  47 
of,  41 

outside  factory,  44 

—  payment  by  time,  32 
to  deputies,  65 

—  piecework,  48-51 
balances,  33,  53 

—  premiums,  49,  55,  58,  60 

—  provision  of  mess-room  for,  35 

—  punctuality  of,  how  secured,  49 

—  rates  of  pay,  33,  56,  58,  72 

—  receipts,  34,  63 

—  remittance  of  wages,  66 

—  resignation  of,  55 

—  savings  bank  funds,  33,  60,  72,  221 

—  sick  funds,  33,  61,  72,  221 

—  superannuation    funds,    33,    61,    ']2, 

221 

—  tendency   to  demand    excess    time 

and  material,  86 

—  time  checks,  34 

records  and  boards,  34,  35,  40, 

41 

—  transference  to  other  departments,  56 

—  unclaimed  wages,  64 

—  unpunctuality  of,  39,  49 

—  wages  of,  34,  72,  220 

—  —  receipt  forms,  66 

—  working  hours  of,  222 
in  more  than  one  shift,  38 

—  work  requires  registration,  16 
Employers'  Liability  Act,  62 
Empties  Book,  217 
Engineering  Magazine,  53,  208 
Enginee7-ing  on  cost  of  manufacturing 

matches,  103 
Envelopes,  pay,  64 
Establishment  expenses,  definition,  254 

—  and  extensions,  201 


Establishment,  profit  and  loss,  118,  119 

—  valuations,  195,  196 
Estimate  forms,  87 

—  of  cost,  definition,  254 

—  of  expenditure  on  fixed  capital,  105 

—  should  precede  manufacture,  87 
Estimated  values  in  relation  to  survey, 

185,  186 
Evolution  of  industrial  organisations,  14 
Exchange,  5 
Expansion,  business,  9 
Expectation  of  service,  147 
Expenditure,  analysis  of,  required,  16 

—  and  cost,  67 

—  auxiliary  operations,  200 

—  average  per  mile  on  railways,  132 

—  labour  and  material  analysed,  28 

—  maintenance  of  fixed  capital,  106 

—  making  good  rejected  stock,  169 

—  not  for  profit,  185,  206 

—  plant  and  machinery,  155 

—  recorded  on  cards,  206 

—  repairs  and   renewals  on   railways, 

132 

—  responsibility  for,  3 

—  vigilance  as  to,  25 
Expenses  burden,  161 
Explosives  and  licences,  221 
Extensions,  cost  of,  201 
Extras,  45 


FACTORIES,  cost  of  gas  and  water 
in,  219 

—  definition,  254 

—  depreciation  of,  118 

—  economy  of,  202 

—  initial  step  in  organisation  of,  32 

—  legislation  as  to,  14 

—  municipal,  202 

—  national,  202 

—  railway,  202 

—  rating  of,  233 

—  regulation  by  empirical  methods,  15 


INDEX. 


271 


Factories,  rent  of,  117 

—  routine  in,  202 

—  rules  of,  71 

—  solidarity  of  labour  in,  49 

—  subsidiary  books  in,  202 

—  warehouses  and,  113,  169 

—  working  for  profit,  206 

Factory  accounts  (see  Contents  gene- 
rally) 
definition,  15,  254 

—  —  essential  books  in  system,  29 

—  —  moral   effect   of  proper  system, 

22 

—  —  non-competitive  concerns,  206 

—  —  proper  system   not  memoranda, 

23,  184 

—  —  subsidiary  books,  202 

—  and  Workshop  Acts,  14,  62,  222 

—  books,  advantages,  24 

and  registers  under,  33 

assimilation  of,  27 

—  —  —    with       commercial      books, 

24 
exteriors,  27,  167 

—  —  home    trade    and   manufacture, 

23 

methods  of  keeping,  23 

misconceptions  as  to,  15 

nature  of,  24 

need  for  system,  23 

relation  of,  27 

"  Factory    Administration    and     Cost 

Accounts,"  222 
Factory  books,  relation  to  memoranda 

books,  24,  184 

—  —  relation  to  subsidiary  questions, 

202 

represent  state  of  affairs,  23 

special  columns,  23 

—  rulings   of,   27,  28,    36,    40, 

41,  43,  44,  45>  46,  47.  48,  50>  52, 
56,  57'  58,  59,  60,  61,  62,  64,  65, 
66,  67,  68,  69,  70,  76,  77,  81,  82, 
83,  84,  87,  88,  89,  90,  92,  93,  94, 


109,  no.  III,  112,  149,  154,  156, 
157,  170,  171,  172,  173,  174,  175, 
176,  177,  187,  188,  208,  209,  212, 
214,  215,  216,  218,  219 

Factory     books     substantiating     com- 
mercial books,  24 

utility  in  cases  of  fire,  23 

Factory  books  and  forms  : — 
Absentee  Book,  39 
Address  Book,  71 
Advertisement  Contract  Register, 

221 
Advice  Note,  79 

—  to  Warehouseman,  173 
Barge  Return,  214 

Boiler  Inspection  Book,  221 
Brigade  (Fire)  Books,  219 
Buildings  Ledger,  106,  130,  140 
Cartage  Advice,  209 

—  Book,  208,  209 
Carters'  Weekly  Returns,  209 
Cash  Sheet,  67 

Casualty  Book,  220 
Catalogues  Issued  Book,  221 
Character  Book,  71 

—  Form,  71 
Coal  Book,  218 

—  Contract  Book,  218 
Colours  of,  27 

Comparative  Cost  Register,  122 
Consignment  Note,  211 
Contracts  Register,  78 

Cost  Journal,  114,  253 

—  Ledger,  30,  70,   107,   108,  109, 

iro.   III,   112,   120-123,   154, 

155.  157,  166,  253 
Craft  Register,  215,  216 
Delivery  Books,  220 

—  Note,  81,  254 
Departmental  Transfers,  97 
Electricity  Meter  Reading  Book, 

219 
Empties  Book,  217 
Estimate  of  Cost,  81,  105,  254 


272 


INDEX. 


Factory  books  and  forms — couiiinted. 
Factory    General    Charges    Book, 

io8,  112,  193,  254 
Fines  Book,  61 
Fire  Hose  Book,  219 
Forwarding  Note,  174 
Fuel  Summary  Form,  219 
Gas  Meter  Reading  Books,  219 
Gate  Book,  191 
Invoice  Allocation  Book,  84 

—  Register,  81,  82 
Jobbing  Ivcdger,  107 

. —  Orders,  81,  107 
Licences  Book,  221 
Lighter  Return,  215 
Loose  Tools  Register,  154 
Machinery  Examination  Register, 

220 
Notices  Book,  220 
Orders  Received  Book,    172,  173, 

175.  256 
Outworks   Time  Record,   43,  44, 

45.  256 
Overtime  Book,  40,  41,  47,  256 

—  Comparison  Book,  41,  47,  256 

—  Return,  41,  46,  47,  256 

—  Slip,  45 

Packing  Case  Register,  217 
Pass  Out  Note,  38 
Patterns  Book,  220,  256 

—  Ledger,  220 

—  Register,  77 
Pay  Bills,  63 
Pay  Sheets,  63 

—  Slips,  63 

Petty  Cash  Book,  78,  109,  256 
Piecework  Analysis  Book,  52,  256 

—  Log  Book,  51 

—  Register,  51 

—  Return,  48,  49,  50,  51,  256 
Plant  Debit  Note,  156,  257 

—  —  Summary,  158,  257 

—  Journal,  158 

—  Ledgers,  106,  155,  156,  257 


Factory  books  and  forms — continued. 
Plant  Recovered  Note,  97,  158 

—  (Loose)  Register,  154 
Printed  in  copyable  ink,  27 
Railway  Rate  Book,  211,  212,  257 
Rate  Book,  58,  59,  62,  257,  260 
Registers  under  Factory  Acts,  72 
Rent  Roll,  73 

Rents  Receivable  Book,  73 

Samples  Register,  77 

Shop  Returns  Book,  97,  258 

—  Transfer  Note,  95,  96 
Staff  Register,  220 
Stationery  Register,  220 

Stock  Debit  Note,  no,   in,  n2, 
168,  182,  258 

—  Issued    Book,    16S,    173,    174, 

181,  201,  258 

—  Ledger,   19-21,   in,   112,  168, 

171,  174,  177,  180-185 

—  Order,  70,  86,  87,  91,  100-113, 

182,  258 

—  Received  Book,  in,  168,  181, 

258 

—  Register,  189 

—  Requisition,   172-176,  181,  258 
Book,    166,    172-177,    181, 

189,  258 

—  Returned  by  Customers  Book, 

167,  177-179.  258 

—  —  Debit  Note,  167,  177,  178, 

258 

—  Transfer  Book,  169,  170 
Stock  Survey  Sheet,  187,  188 
Stoppages  Agreement  Form,  61 
Stores  Debit  Note,  93,  94,  95,  96, 

259 

—  Delivery  Diary,  220 

—  Issued  Book,  89,  90,  259 
Note,  89 

—  Journal,  91 

—  Ledger,    19,    24,    29,    83,   85, 

90,  97,  171,  183-186,  187,  259 

—  Received  Book,  82,  85,  in,  259 


lNt)EX. 


273 


Factory  books  and  forms — continued. 
Stores  Register,  189 

—  Rejected  Book,  92,  93,  259 
Note,  92 

—  Requisition    Book,    75-79,   93, 

259 

—  Requisitions,  75,  76,  259 

—  Sent  Away  Form,  92 

—  Sold  Analysis  Book,  iSi 

—  Transfer  Book,  169-171 

—  Warrants,  88,  89,  182,  190,  259 
Surprise  Visits  Book,  220 
Survey  Sheets,  186,  187 

Time  Allocation  Book,  43-45,  50, 
70,  259 

—  Boards  or  Sheets,  41,  43 

—  Book,  35-44,  259 

—  Records,  32,  41,  42,  44,  259 
Tool  Order,  106,  260 
Towage  Book,  216 

Transfer  Analyses  Book,  171,  260 

—  Book,  97,  169-171,  181,  182 

—  Notes,  169-171,  260 
Unclaimed  Wages  Book,  64,  65, 

260 
Visitors'  Book,  220 
Wages  Abstract,  70 

—  Advice,  57,  58,  59,  260 

—  Book,  32,  33,  44,  47,  52,  59- 

70,  260 

—  Journal,  70 

—  Pay  Note,  66 

—  Rate  Book,  56,  58,  62,  260 

—  Receipts,  63 

—  Remittance,  66 

—  Summary,  33,  60,  62 
Wagon  and  Van  Books,  213,  214, 

260 

—  Journey  Repairs  Book,  214,  215 
Water  Meter  Books,  220 
Weather  Chart  Book,  220 
Weighing  Machine  Book,  218 
Working  Orders,  41,  69,  77,  87, 

91,  152,  156-161,  261 


Factory  Costs,  System  in,  30,  158 

—  Forms,  colours  of,  27 

printed  in  copyable  ink,  27 

—  and  extensions,  201 

—  Book  for,  108,  254 

—  general  charges,  108,  254 

—  their  allocation,  114 

—  their  relation  to  valuations,  192 

—  Order  (see  Stock  Order) 

"  Factory  System,  History  of  the,"  15 
Factory    System,    development  of  the 
modern,  13,  23 

—  —  extension  of,  14 

—  —  industrial  conditions,  14 

—  —  new  power  in  civilisation,  14 

—  —  specialisation  of  labour,  102 
Falk,  Mr.  H.  J.,  18 

Family  System,  23 

Fees,  professional,  9 

Fines  and  the  Truck  Acts,  61 

—  appropriation,  72 

—  Book,  61 

—  change  of  address,  71 

—  recorded  and  deducted,  t,},,  57,  61 

—  unpunctuality,  49 

Fire  insurance  (see  Insurance) 
Fire  Hose  Books,  219 
Fixed  capital,  5-8  (see  generally  Chapter 
VI.,  126-145) 

—  —  definition,  254 

machinery,  126 

Mill's  definition  of,  126 

—  —  overtime,  47 

•  purchase  hire,  203 

surveys,  186 

—  Charges,  114 

—  instalment  system,  148 
— -  plant,  definition,  254 
Fletcher,  Mr.  Banister,  152 
Forage,  cost  of,  209 
Foreman,  clerical  work,  24,  25 

—  dummy  men,  33 

—  exchange  of  material,  84 

—  instructions  to  manufacture,  102 


274 


lNt)EX. 


Foreman,  overtime,  47 

—  payment  of  wages,  62 

—  permits,  39 

—  piecework,  50 

—  plant,  156 

—  purchase  of  material,  74 

—  stores  warrants,  88 

—  surplus  material,  94 

—  time  records,  40,  41 

—  wages  of,  107,  115 

advice,  57 

Formation  expenses,  58 
Forwarding  note,  174 

Foster  v.    The   New    Trinidad    Lake 

Asphalte  Co.,  Ltd.,  141 
Foundries,  116 
Fraud,  chances  of,  minimised,  32 

—  instance  of,  32 

—  prevention  of,  16 
Freeholds,  8 
Freight  note,  210-214 
Freightage,  210 

Fuel,  cost  of,  9,  115,  161 

—  its  allocation,  161 

—  records  of,  203,  218,  219 

—  summary  form,  219,  255 
Fundamentals  of  a  Cost  System,  i8-2i 
Furniture,  manufacture  of,  lOi 


GALLOWAY  V.  Schill,  Seebohm, 
&Co.,  127 
Gas,  consumption  of,  how  checked  and  j 
localised,  219  I 
Gas  companies'  accounts,  23 
double  account,  131 

—  —  expenditure  in  workshops,  9,  206 
factory,  books  required  for,  23 

—  —  Meter  Reading  Books  0/,  2ig 

—  Works  Clauses  Act  (1871),  23 
Gate  Book,  191 

Gatekeeper  (see  Timekeeper) 

—  cartage,  208 

—  permit  to  remove  goods,  190 


Gatekeeper,  wages  of,  107 
Gaux,  Mr.  Edmund  C,  120 
General    charges,     195-196,    255    (see 
Factory  General  Charges) 

—  ledgers  account,  124 

—  stores  account,  255 

Gibbins'      "Industrial       History      of 

England,"  13 
Gill,  Mr.,  130,  151 
Glasgow  Cotton  Spinning  Mills,  157 
Glossary,  29,  253-261 
Goddard,  Mr.  F.  R.,  20 
Going  concern,  definition,  255 
Goodwill,  definition,  8,  162,  255 
Goodwin,  Mr.  A.  E.,  30 
Government  factories,  202,  206 
Graphs,  122 
Guild  system,  24 
Gunpowder  licences,  221 


HALSBURY,  Lord,  140 
Halsall,  Mr.  F.,  A.C.A.,  205 
Halstead  silk  factory  and  rating,  235 
Hamilton,  Mr.  W.  R.,  F.C.A.,  121 
Handling,  in  surveys,  185 
Harlen,  Mr.  Joel,  96 
Harper,  Mr.,  gross  and  rateable  value, 

243 
Health  contributions,  61 
Heating  factories,  cost  of,  9,  115 
Hedley,  Mr.,  on  rating,  233 
Henley,'. Walter  de,  13 
Hire  (see  also  Purchase  Hire),   horses 

and  vehicles,  208 
—  trucks,  213 
Historical  costs,  122 
Hollerith  machines,  26 
Home  Office  and  sidings,  223 
Hops,  pricing  of,  196 
Horse  account,  209 
House  of  Lords'  decisions,  140 
House  rent,  deductions  for,  61 
Hunslet  Assessment  Committee,  233 


INDEX. 


275 


IDLE  Capacity  Plant,  160 
—  hour,  161 
Implements    (see    Machinery,     Plant, 

Tools,  etc.) 
Improvement,  business,  9 
Improvements  Fund,  152 
"  Incidence  of  Local  Taxation,"  233 
Income,  5 
Income  Tax  Acts,  144 

depreciation,  145 

employees',  61 

profits,  5,  144 

—  —  valuations,  144 
and  wagon  hire,  205 

Indirect  expenses,  cost  of  production, 
29,  103-107,  114-121 

—  —  definitions,  255 

loose  plant  and  tools,  152 

profit  and  loss,  114 

ratio  to  direct,  1 14-120 

skilled  labour,  116 

wages,  105,  114,  116 

working  orders,  114,  120 

Industrial  economy,  measure  of,  116 

—  economists,  2,  125 
"Industrial  History  of  England,"  13 
Industrial    organisations,    their   evolu- 
tion, 13-15 

—  waste,  125 
Industrialists,  12 

"  Industry  and  Trade,"  i 

"  Industry,   The    Economics    of,"  96, 

121 
Instalments  on  purchase  hire,  203 
Insurance,  5,  9,  144 

—  claims  on  companies,  22 

—  profit  and  loss,  144 

—  uninsured  ships,  137,  144 
Interest  and  rating,  242 

cost  of  production,  5-8,  119,  199 

—  depreciation,  147 

—  horse  and  vehicle  account,  209 

—  leases,  147 

—  on  capital  in  employees'  houses,  202 


Interest,  purchase  hire  system,  203 
Inventory  (see  Surveys),  255 

—  of  premises,  77 
Invitation-to-tender  forms,  76 
Invoice  Allocation  Book,  84,  255 
Invoice  Register,  80,  84,  255 
Invoices,  definition,  255 

—  directions  to  vendors,  80 

—  endorsement,  84 

—  examination,  81 

—  goods  loaned,  178 

purchased,  28,  80,  181 

retailed,  181 

sold     direct,     166,     167,     175, 

179 

—  on  Order  forms,  80 
— •  outward,  167 

—  references,  83 
— ■  registration,  80 

— -  Stores  Requisition  Bool;,  76 

"  Inwood's  Tables,"  250 

Issue  Notes,  88 

Issuer  of  material,  duties,  188-192 


JOB  costs,  28 
Jobbing  shop,  107 
Jobbing  orders,  107 

—  ledger,  107 

Joint-stock  companies,  definition,  255 

—  conversion  of  private  firms,  22 

—  depreciation,  130 

—  law,  capital,  and  revenue,  135-144 

—  valuation  of  assets,  162 


KIRBY  V.  Assessment  Committee 
of  Hunslet  Union,  239 
Knoepel,  Mr.  F.  J.,  125 


LABELS  (Stores  Survey),  190 
Labour,  combination,  14 
Labour,  definition,  255 


276 


INDEX. 


Labour,  division,  103 

—  economy  in  clerical,  24 

—  employment,  16,  24 

—  expenditure,  70 

—  machine  labour,  8 

—  maintenance  of  buildings,  105 

—  —  on  machinery,  105 

—  rejected  stock,  169 

—  remuneration,  4 

—  skilled  and  unskilled,  116 

—  solidarity,  49 

—  specialisation,  13,  24,  102 
Laing  rating  case,  235 

Land,  gross  and  rateable  value,  243 
Lands  Valuation  Act,  242 
Law  Times  and  rating,  237 
Leading  hand,  definition,  255 

outside  work,  43-47 

piecework,  50 

stock  debit  notes,  1 10 

store  warrants,  88 

time  records,  32,  42,  43 

Leakage,  prevention  of,  16 
Leake,  Mr.  F.  D.,  on  depreciation,  159 
Leases,   amortisation  of,   8,    148,    149, 
244,  250 

—  buildings,  133,  146 

—  Ledger  Account,  149 

— ■  Table  for  amortising,  244-250 
Ledger  account,  123 
Ledgers  (see  under  Commercial  Ledger) 
Lee  V.  Neuchatel  Asphalte  Co.,  137 
Legal  decisions  on  rating,  234-243 
Legislation,  rating  of  Machinery,  233- 

243 
Leigh,  Mr.  A.  A.  Austin,  30 
Lessees,  liabilities  of,  152 
Lever,  Sir  S.  H.,  19 
Liabilities,  definition,  255 
Licences  Book,  221 
Life  of  machinery,  126-135,  145-163 
Lighter  return,  214,  215,  216 
Lighting  of  factory,  115  (see  also  Gas) 
Lindley,  Lord,  139 


Liquid  trades,  accounts  of,  27 

Loading,  216 

Local  bye-laws,  222 

Localisation  of  cost,  24,  94,  102,  106 

Lockers,  190 

Locomotives,  light,  221 

—  use  of,  in  sidings,  222 
Lodging  money,  65 

London  Assessment  Conference,  243 

—  Brighton  and  South  Coast  Railway, 

141 
Looms,  deductions  for  rent  of,  61 
Loose  leaf  ledger,  26 

—  plant  and  tools,  153,  255 
Loose  Tools  Register,  154 

Loss  (see  under  Profit  and  Loss) 
Lost  Time  Account,  43 

Ticket,  43 

Lubbock   V.    British    Bank    of    South 

America,  Ltd.,  140 
Lybrand,  M.  William,  P.C.A.,  197 


MACHINE  hour  rates,  2,  157 
—  labour,  8 

—  name,  228 

—  symbol,  228 

Machinery,  assessment  of,  31,  233-243 

—  charges  for  use,  105 

—  checker,  156 

—  comparative  cost  of,  105,  126 

—  congealed  labour,  120 

—  cost  of  setting,  105 

—  depreciation,  127,  147 

—  details,  225-232 

—  Examination  Register,  219 

—  expectation  of  service,  147 

—  expenditure,  155 

—  fixed  capital,  126,  163 

—  gross  and  rateable  value,  241,  242, 

243 

—  hand  labour,  118 

—  labour  on,  105 

—  life  of,  105,  126-136,  145163 


INDEX. 


277 


Machinery,  maintenance  of,  128 

—  numbering  of  objects,  155 

—  obsolescence,  133,  241 

—  personal  equation  in  working,  128 

—  purchase  hire  system,  203 

—  rates,  155-163 

abnormal,  161 

normal,  161 

—  rating  of,  233-239,  243 

—  record  of  working  hours,  157-161 

—  residual  value,  15S 

—  rest,  157 

—  running,  161 

—  scrapping  of,  136 

—  sinking  funds,  143 

—  specialisation  of  labour,  27 

—  supersession  of,  129 

—  symbolic  nomenclature  for,  225-232 

—  the  economy  of,  103 

—  unskilled,  136 

—  use  of,  16,  120,  146-163 

—  valuation  of,  135 

—  wear  and  tear  of,  135 

—  yearly  replacement  of,  134 
Machinery  Users'  Association,  239,  240 
Magazine  (see  Store),  255 
Maintenance,  definition,  255 

—  roads,  9 

Male  servants,  licences  for,  221 
Management,  earnings  of,  5 
Man  of  business,  1 1 
Mann,  Sir  John,  25,  147,  161 
Mansion   House  Association  for  Rail- 
way and  Canal  Traffic,  213 
Manual  power,  8 
Manufactory  (see  Factory) 
Manufacture,  checks  upon  wasteful,  26 

—  material  for,  27 

—  stage  of,  7 

Manufacturer,   distinction  between  re- 
tailer and,  180 

—  and  selling  price,  17,  122 
Manufacturing  account,  109,  208,  255 

—  cost,  22,  28 


Margin  of  error  in  stores,  187 
Market  price,  135,  196,  200,  256 

—  value,  143,  193 
Marketing,  9,  30,  119 

Marshall,    Dr.    Alfred,    1-5,    96,    119, 
127,  128 

and  Mary  P.,  104 

Marx,  Karl,  119 

Master  of  the  Rolls'  decisions,  6,  236, 

237 

Matches,    manufacture    and     cost    of, 

103 
Material,  cartage,  208 
— ■  definition,  256,  257 

—  distinction  between  raw  and  manu- 

factured, 9,  30 

—  economy  in  purchasing,  74 

—  economy  in  use,  74 

—  employer  sanctioning  purchase,  74 

—  estimated  expenditure,  85 

—  expenditure     on      rejected     stock, 

169 

—  implements  and  building  becoming, 

126 

—  indirect  charges,  115 

—  initiative  in  expenditure,  86 

—  initiative  in  purchase,  74 

—  issuer  of,  pricing,  189 

—  —  receiving  warrant,  190 

—  keeping  stock,  190 

—  limitation  of  issue,'  86 

—  pricing,  154,  192-200 

—  purchase,  74 

—  receipt  and  issue,  74-98,  180 

—  requisition  from  storekeeper,  74 

—  reserve  store,  84'" 

—  return  to  store,  94,  97 

—  returned  to  vendors,  92 

—  scrap,  1 1 1 

—  storage,  16 

— ■  store  of,  19,  190 

—  stores,  259 

—  surplus,  88,  III 

—  survey,  187,  188 


278 


INDEX. 


Material,  use  of,  i6,  27,  85 

—  —  in  manufacture,  100,  112 

—  used  for  tools,  106 

—  used  on  plant  and  machinery,  155 

—  weights  in  factory  books,  23 
Matheson,  Mr.  Ewing,  134 
Maturing  material,  193,  194 
Maughfling,  Mr.  J.,  194 
May,  Mr.  G.  O.,  120 
Mechanical  aids,  26,  42 
Measure  of  industrial  economy,  116 
Memoranda  books  and  factory  books, 

24 
Merchants  and  selling  prices,  18 
Merger  companies,  197 
Mess-room,  35 
Metcalfe,  Captain  H.,  206 
Metalliferous  mines  accounts,  102 
Mill,;.  S.,  5,  126 
Miller,  Mr.  F.  R.,  20 
Mining  royalties,  164 
Mistakes  account,  96 
Mixing  trades,  accounts  of,  27 
Moisture  and  stocks,  186 
Money,  cost,  5 

—  expression  in,  3-5 

—  trays,  68 

Monthly  and  4-weekly  payments,  43 

Monopolies,  163 

Morawetz,  Mr.,  142 

Motor  lorries,  209 

Multiple  costs,  27 

Municipal  charges,  9 


NATIONAL  Expenditure— Select 
Committee  on,  3 
National  Insurance  Act,  33,  61 
Neuchatel  Asphalte  Company,  137 
Nomenclature,  symbolic,   for   machine 

details,  31,  105,  206,  225-232 
North    British     Railway    and    factory 
rating,  242 


Normal  Value,  Law  of,  96 

Notices  Book,  221 

Notices  of  Accident  Act,  222 


OBSOLESCENCE,  definition,  256 
—  comparative  risk  of,  182 

—  in  relation  to  profit  and  loss,  133 

—  in  relation  to  purchase  hire,  204 

—  of  machinery  and  tools,  134 

—  of  patterns,  155 

—  of  stock,  200,  201 

—  of  stores,  200,  201 

—  risk  of,  universal,  134 
Office,  organisation  of,  25 

—  rent  of,  115 

—  routine  of,  25 
Oil,  costs  of,  9 

Oils,  inflammable,  and  licences,  221 
Old  material,  94 

—  —  accounts  for,  200 

valuation  of,  200 

On  Approval  Ledger,  179 

Oncost,  161  (see  also  Factory  General 

Charges),  114 
Operation  costing,  107 
Order  forms  and  invoicing,  78 
Orders  Received  Book,  172,  173,  256 
Orders  received,   examination  of  con- 
ditions, 173 

—  to  manufacture  (see  Stock  Order) 

—  to  vendors,  77,  256 
Out-Station  Stores  Account,  85 
Out-workers,  65 

Out  -Works     Time     Record,    43,     44, 
256 

specimen  ruling,  45 

Overlooker,  definition,  256 

—  purchase  of  material,  74 

—  return  of  material,  94 
Overtime,  37-40,  256 

—  allocation,  47 

—  Book,  40,  256 

—  check  upon,  47 


INDEX. 


279 


Overtime    Comparison   Book,    46,    47, 
256 

—  comparison  with  ordinary,  47 

—  depreciation,  135 

—  economic  aspect  of,  47 

—  factory  Acts,  223 

—  fixed  capital,  47 

—  made  outside  factory,  47 

—  minimising  amount  of,  29,  33,  47 

—  Rettirn,  i\6,  47,  256 

—  slip,  47 

—  specimen  ruling  of  forms  for,  40,  46 

—  time  records,  41,  42 
Owner's  risk,  211 


PACKING,  77,  203 
—  account,  203,  217 

—  cases,  217 

—  case  register,  217 
Panics,  9 

Paper  trades  accounts,  27 

Parts,  costs  should  be  known,  loi,  182 

—  list  of,  192 

—  manufacture  of,  9 

—  standardised    and    interchangeable, 

182 

—  supply  and  sale,  192 

—  symbolic   nomenclature,    104,    225- 

232 
Pass-out  note,  39 
Patented  patterns,  155 
Patents,  8,  9,  162 

—  account,  256 
Patterns,  Rook,  220 

—  definition,  256 

—  depreciation,  155 

—  Ledger,  220 

—  Register,  77 

—  symbolic  nomenclature,  225 
Paula,  F.  R.  M.  de,  196 

Pay  Bills,  63 

—  clerk,  "dummy  men,"  33 

—  envelopes,  67 


Pay,  payment  of  wages,  62-70 

—  rates  of,  altered,  33,  50-56 
recorded,  33,  50-56 

—  rolls,  63 

—  unclaimed  wages,  64 
Pay  Sheets,  63 

—  slip,  63 

—  tins,  67 

—  Wages  Note,  65,  66 
Payment  by  results  (see  Piecework) 

—  of  wages,  how  made,  34,  52-70 
minimising  errors  in,  32 

—  — -to  deputies,  65 
Penalties  for  non-completion,  173 
Penalty  clause,  76 

Permits,  8 

Personal  accounts,  166,  204 

Petty  Cash  Book,  109,  256 

purchases  through,  78 

Phoenix  Gas  Company,  235 
Pick-up  Mechanical  Messenger,  42 
Piece  name,  228 

—  symbol,  229 

—  work,  50,  256 

Piecework  Analysis  Book,  36,  256 
specimen  ruling,  52 

—  balances,  how  recorded,  33,  50,  51 

—  compared  with  day  work,  52 

—  definition,  256 

—  gangs,  52 

—  Log  Book  for,  51 

—  method  of  recording,  50 

—  non-continuous  working,  50 

—  publication  of  particulars  of,  50 

—  register,  51 
Book,  51 

—  regulating  and  recording  rates,  33, 

50 

—  Return  Form,  50,  52,  257 

—  —  specimen  ruling,  48 

—  viewer,  duties,  50 

—  wages,  52,  60 

Pins,  manufacture  of,  104 
Pixley,  Mr.  F.  W.,  148,  197 


28o 


INDEX. 


Planning  department,  87 
Plant,  15,  16,  74,  126,  164,  257 

—  and  extensions,  201 

—  books,  27 

—  cost  of  maintenance,  105 

—  current  value,  127 

—  Debit  Note,  156,  257 
specimen  ruling,  156 

—  Debit  Sum inary,  157,  257 
specimen  ruling,  157 

—  definition,  257 

—  depreciation,  127,  132,  135 

—  deterioration  on  railways,  132 

—  idle  capacity  of,  160 

—  incidence  of  deterioration,  22 

—  Journal,  1 58 

—  Ledgers,  80,  155,  156,  257 
specimen  ruling,  154 

—  loose,  154 
register,  154 

—  maintenance,  29,  105,  128 

—  material  expended,  155 

—  numbering  objects,  156 

—  purchase,  203-206 

—  Recovered  Note,  97 

—  repairs  and  renewals,  29,  105 

—  residual  value,  158 

—  sinking  fund,  137,  138 

—  surveys,  188 

—  use  of,  2 

—  valuation,  135 

—  wages  expended,  155,  156 

—  wear  and  tear,  2,  135 

—  working  numbers  for,  156 

—  yearly  replacement,  134 
Police,  9 

Power  costs,  2,  161 

—  labour,  8 

—  manual,  8 

"  Practical  Treatise   on  Rating,"  234, 

235 
Premises,  waste  of,  147 
Premiums  to  employees,  49 
Prevention  of  Corruption  Act,  76 


Price,  Mr.  E.  E.,  F.C.A.,  26 

Prices,  2 

Price   sheets,    symbolic    nomenclature, 

226 
Pricing,  average,  89 

—  matters    between    departments    or 

companies,  197 
Prime  cost,  5-7,  29,  100-125,  257 

admits  of  varied  treatment,  19 

books,  28,  29 

definition,  257 

employees'  rent,  72 

—  products,  98 

"  Principles  of  Economics,"  127,  128 
"  Principles    of    Political    Economy," 

126 
Private  sidings,  213 
Processes,  2,  8,  9,  98,  102 

—  profit  or  loss  on,  18,  81 
Produce  companies,  197 
Production   as  an   auxiliary  operation, 

202 

—  betterment,  116 

—  cost  of  (see  Cost  of  Production) 

—  engineer,  121 

—  evolution  of  methods  of,  15 

—  home,  161 

—  of  tools,  106 

—  order  (see  Stock  Order) 

—  organisation  of,  14,  15 

—  return,  87 

—  without  industrial  organisation,  13 
Products,  seasoned,  197 

Profit  and  capital,  income  tax,  144 

—  valuations,  192-201 

—  and  loss,  19,  166,  257 
cartage  account,  208,  210 

—  —  departmental  depreciation,  152 
depreciation,  114,  127,  162 

—  — ■  establishment  expenses,  118 
estimated  increments,  163 

—  —  income  tax,  145 

—  —  indirect  charges,  114 
insurance,  144 


INDEX. 


2SI 


Profit  and  loss,  leases,  148 

loaned  goods,  178 

loose  plant,  152 

market  price,  195 

Mr.  Justice  Buckley  on,  137 

not  savings,  201 

on  branches,  16 

on  individual  transactions,  16 

patterns,  153,  155 

—  —  transfers    between    departments 

and  allied  companies,  197 

purchase  hire  system,  203-206 

railway  accounts,  132 

receipts  and  expenditure,  127 

residual  values,  157 

retail  trading,  180 

revenue  and  capital,  137-144 

sales,  168,  195-197 

—  —  trading  account,  179 

water  companies'  accounts,  133 

—  —  yearly  valuations,  135 
Profits,  5 

Pro-forma  orders,  78,  178 
Progress  Department,  65 

—  Report,  87 

Public  Health  Acts,  222 
Publicity,  9 

Punctuality,  premiums  for,  49 
Purchase  hire  system,  203-206 

book-keeping  entries,  204 

capital  account,  204 

instalments,  203-206 

interest  account,  204 

non-completion,  205 

obsolescence,  204 

plant  account,  204 

profit  and  loss,  204 

Purchases  through  petty  cash,  78 
Purchasing  department,  75 


Q 


UALITATIVE  analyses,  II,  12     | 
Quantitative  analyses,  il,  12        I 


RAILWAY  and  Canal  Commission 
Court,  6,  211 

—  classification  of  traffic,  211 

—  Clauses  Consolidation  Act,  213 

—  companies  and  consignment  notes, 

211 

—  companies     and     double     account 

system,  131 

—  cost  of  working,  6,  7 

—  deterioration  of  plant,  131 

—  factory  books  required  for,  23 

—  factories,  202,  206 

—  fares,  65 

—  Order  Confirmation  Acts,  211 

—  rates  charged  by,  2 1  x 

—  Rates  Act,  211 

—  Rates  Book,  257 

—  Returns  and  Accounts  Act,  23 

—  sidings,  213 

—  units  of  cost,  10,  II 
Rate  Book,  56,  62,  257,  260 
Rates,  9 

—  compounding,  72 

Rating  of  assessments,  234,  241 

—  Bill,  236 

—  Carmichael  &  Co.,  Limited,  242 

—  Chard  Assessment  Committee,  237 

—  chattels,  234 

—  checks  on  assessment,  241 

—  Cowan  &  Sons,  Limited,  242 

—  factories  and  machinery,  31,  233-242 
in  Scotland,  242 

—  gross  value,  240-243 

—  Halstead  silk  factory,  235 

—  interest  account,  241 

—  Laing  case,  235 

—  Lands  Valuation  Act,  242 

—  Law  Times,  237 

—  legal  decisions,  234,  235 

—  legislation  proposed,  237,  240 

—  Lord  Chief  Justice  Cock  burn,  235 

—  machinery,  233-243 

—  Master  of  the  Rolls,  236 

—  mode  of  computing  assessments,  233 


282 


INDEX. 


Rating,  Mr.  Hedley,  233 

—  North    British    Railway   Company, 

242 

—  Phoenix  Gas  Company,  235 

—  "  Practical  Treatise  on,"  235,  238 

—  Rateable  value,  240-243 

—  recent  decision,  236 

—  rule  of  rating,  237 

—  Tyne  Boiler  Works,  236 
Raw  Material  (see  Material) 
Receipts,  stamps,  and  wages,  64 
Records,  differentiation  of,  27 
Register  of  Women  and  Children  under 

Factory  Acts,  72 
Registration,  economy  of  methods  of, 

14 

—  of  expenditure,  16 
Regulations  as  to  periods  and   condi- 
tions of  employment,  14 

Renewals  and  repairs,  257 

Rent,  deduction  from  wages,  33,  73 

—  factory,  1 14 

—  houses  occupied  by  employees,  72 

—  office,  115 

—  roll,  73 

Rents  Receivable  Book,  73 
Repairs,  257 

—  for  customers,  106 
Replacement,  8 
Research,  9 

Reserve  funds,  appreciation  of  assets, 

143 

—  —  definition,  257 

—  —  profits  of  water  companies,  133 

—  —  provision  for  insurance,  144 

—  —  residual  values,  158 
Residual  products,  98 

—  value,  definition,  257 

—  —  depreciation,  128,  147 

—  —  profit  and  loss  account,  158 
Retail    transactions,    store    and   stock, 

169,  180 

—  warehouse,  180,  257 

Returns  Book  (see  Shop  Returns  Book) 


Returns  (see  Stock  Returns  and  Stores 

Rejected) 
Revenue,  capital  account,  137-143 

—  definition,  257 

—  fluctuations  of  market  value,  143 

—  Government  factories,  202 

—  Income  Tax  Acts,  144 

—  opinion  of  Mr.  Justice  Buckley  on, 

137-139 

—  sinking  and  reserve  funds,  143 
Rider,  Mr.  Jas.,  159 

Roads,  maintenance  of,  9 
Roland,  Mr.  Henry,  208 
Routes,  77,  173 
Royalties,  8 

Rules  and  regulations  in  factories,  71, 
72 


SACKS,  217 
Salaries,  9 
Sale  of  Goods  Act,  78 

—  of  parts,  192 

—  or  return,  178 

Sales  analysis  book,  definition,  257 

converse  of,  177 

purpose,  166,  167,  175,  180 

stock  requisitions,  175 

—  and  symbolic  nomenclature,  226 

—  book,  178 

—  —  purpose,  166,  178,  179 

—  Cancelled  Book,  definition,  257 

—  goods  on  loan,  178 

Sales  Day  Book,  167,  177,  178 
Salicis,  Earle  A.,  158 
Samples  Register,  77 
Sanitation,  9 
Savings  bank  fund,  ^ili  60,  222 

—  not  profits,  201 

Scale  adjustments,  161,  187 

—  costs,  98 

Scientific  management,  19 
Scrap  material,  11 1 

—  (see  Residual  Value,  257) 


INDEX. 


283 


Seasoning  material,  194 

Self- balancing,  125 

Selling  prices  and  cost  of  tools,  106 

competition  and  cost,  18, 120, 121 

Services,  auxiliary,  9 

—  contingency,  9 

—  State,  9 

Shafts,  deductions  for  rent  of,  61 

Sheets,  217 

Shipment  of  goods,  173 

Shop  cost,  117,  124 

Shop  Hetitrns  Book,  definition,  258 

purpose  and  specimen  ruling,  94 

Shop  sweepings,  95 

—  Transfer  Note,  94,  95 

—  Work  Order  (see  Stock  Order) 
Shops,  cleansing  of,  72 

—  expenses  in,  114 

Sick  fund,  employees',  33,  60,  72,  221 

—  —  books,  222 
Sidings,  private,  213 

—  railway,  213 

Sinking  fund,  143-152,  258 

Skips,  217 

Sliding  scale,  23 

Small  articles,  86 

Smith,  Professor  Robert  II.,  116 

—  Mr.  Oberlin,  and  nomenclature,  23, 

105,  203-210,  225-232 
Smoke,  222 
Specialised  capital,  5 
Specifications,  87 

Specimens  of  rulings  (see  Factory  Books) 
Spoiled  work,  96 
Stable  expenses,  209 
Staff  Kegistei-  Book,  220 
Standard  costs,  28 
Standing  charges  (see  General  Charges) 

—  orders,  105 
State  charges,  9 

—  services,  9 
Stationery,  cost  of,  115 
Stationo-y  Registe7-,  220 
Steam  cost,  9,  161 


Stock,  165,  182,  258 

—  account,  definition,  258 

—  amalgamation  with  stores,  189 

—  balancing  prime  cost  book,  ill,  1 13 

—  books,  15,  166,  181,  188,  258 

—  cost  of  special  tools,  106 

—  cost  value  of,  shown  in  ledger,  108 

—  costs  of  parts,  106 

—  definition  of,  28,  258 

—  depreciation  of,  199,  200 

—  distinguished  from  stores,  30,   100, 

189,  192 

—  efficiency  of  control,  190 

—  generally  kept  till  demand  arises,  199 

—  identification  by  numbers,  1S9 

—  in  relation  to  prime  cost,  29 

—  in  relation  to  solvency,  193 

—  in  relation  to  stores,  28,  100,  loi 

—  in  relation  to  surveys,  189 

—  insurance,  144 

—  interest  on,  8 

—  in  warehouse  known  to  storekeeper, 

191 

—  knowable  without  survey,  19 

—  losses  on,  201 

—  manufacture  for,  86,  88 

—  manufacture  of  parts,  182 

—  moisture  in,  186 

—  obsolescence,  200 

—  packing  cases,  217 

—  posting,  to  ledger,  168 

—  pricing  of,  at  surveys,  193,  194,  199 

—  production  should  be  for,  98 

—  reduction  in  value  of,  200 

—  rejected  by  customers,  177,  179 

—  responsibility    for,    compared    with 

cash,  188-191 

—  retail  transactions,  180 

—  return  of,  to  factory,  166 

—  return  of,  to  warehouse,  167 

—  sale  or  distribution  of,  166 

—  sent  out  on  loan,  178 

—  sent  out  on  loan,  invoicing  of,  178 

—  surplus  material,  88 


284 


INDEX. 


Stock  survey  sheets,  187 

—  taking  (see  Surveys) 

—  transfer  to  stores,  94,  95 

—  uncompleted,  112,  258 

—  value  of,  ready  for  sale,  how  ascer- 

tained, 180 

—  when  realisable    at    market    rates, 

196 
Stock  Debit  Note,  definition,  258 

function  of,  168,  182 

specimen  ruling,  no 

Stock  Issued  Book,  alternate,  175 
definition,  258 

—  —  losses  on  stock,  201 
purpose  of,  166,  174 

—  —  retail  transactions,  171,  180 
specimen  of,  174 

Stock   Ledger,   commercial   books,    19, 

23 

definition,  258 

losses  on  stock,  201 

posting  of,   loi,   168,   171,   177, 

178 

prices  of  articles  in,  166 

retail  transactions,  180 

—  —  specimen  ruling  of,  112 

—  —  stock  in  hand,  19 

subdivision   of  warehouse,    188, 

189 
substantiation    of    balances    in, 

185 

surveys,  185-188 

transfer  book,  97,  171 

—  —  utility  of,   as   regards   stock   in 

trade,  182 
Stock  Order,  account,  lOI 

—  —  balances,  Ii2 

booking  time  and  material,  85, 

86,  100,  105 

—  —  definition,  258 

estimate,  87,  106 

general  charges,  loS,  114 

generic,  86 

initiation,  86,  91 


Stock  Order,  number,  41,  91,  258 

plant,  105,  156 

time  allocation  book,  70 

tools,  107 

—  —  uncompleted,  112 

Stock  Received  Book,  definition,  258 

Debit  Note,  168 

purpose  of,  no,  168,  181 

retail  transactions,  180,  181 

Stock  Register,  189 

Stock  Requisition,  definition,  258 

orders  received,  174 

retail  transactions,  181 

sales,  167,  174,  175,  177 

—  —  specimen  ruling  of,  172,  176 
Stock  Returned  by  Customers'  Analysis 

Book,  258 

purpose  of,  167,  177,  179 

Stock   Returned   by    Customers'    Book, 

258 

purpose  of,  167,  177 

specimen  ruling,  177 

Stock  Returned  Debit  Notes,  definition, 

258 

—  —  purpose,  167,  177,  1 78 
specimen  ruling,  176 

Stock     system,     essential     condition, 

190 
Stocktaking,  258  (see  Survey) 
Stock  Transfer  Book,  1 70 
Stoppages  Agreement  Form,  61 
Storage  accommodation,  2 
Store,  258 
Stores  account,  259 

—  amalgamation  with  warehouse,  188 

—  and  warehouseman,  191,  192 

—  articles  retailed,  180 

—  at  seller's  works,  85 

—  bookkeeping,  74-9S,  189 

—  building  location  of,  190 

—  carriers'  wharf,  85 

—  definition,  30,  100,  259 

—  department  and  prices,  162 

—  depreciation,  200 


INDEX. 


285 


Stores,  direct  goods,  80 

—  distinguished  from  stock,  30,   100, 

188,  190,  259 

—  excess  supply,  192 

—  general,  82,  85 

—  identification  by  numbers,  190 

—  in  bonded  warehouses,  85 

—  interest  on,  8 

—  in  transit,  85 

—  labels,  190 

—  lockers,  190 

—  losses,  201 

—  margin  of  error  in,  187 

—  mechanical  divisions,  189 

—  obsolescence,  200 

—  out-stations  account,  85 

—  parts  in,  192 

—  pricing,  90,  190,  193-201 

—  purchase  comparison,  122 

—  railway  shed,  85 

—  reduction  in  value,  200,  201 

—  relation  to  prime  cost,  29,  108 

—  relation  to  stock,  76,  loo,  loi 

—  sectional,  189,  190 

—  special,  61,  82 

—  subdivisions,  188 

—  sub-stores,  90 

—  surveys,  19,  183-201 

—  transfers    of,    97,     169,    181,     182, 

192 

—  wages  of  distributing,  106 

—  warrant,  89-91 

—  waste  in,  187 

Stores  Contract  Register,  77 
Stores  Debit  Note,  definition,  259 

purpose,  94,  95 

specimen  ruling,  93 

Stores  Delivery  Diary,  220  , 
Stores  Issued  Book,  89,  259 
Stores  Issued  Notes,  89 
Stores  Journal,  91 
Stores  Ledger,  account,  82 

agreement      with       commercial 

ledger,  85 


Stores  Ledger,   commercial  and   subsi- 
diary books,  23,  29,  82 

—  —  commercial  ledger,  19,  82,  153, 

184 

—  —  definition,  259 

—  —  duty  of  clerk  keeping,  83 

posting  of,  82,  85 

pricing  warrants,  190 

—  —  specimen,  83 

—  —  stores  in  hand,  19 
Stores  Issued  Book,  89 

—  —  Stores  Received   Book,  82,  83, 

259 

—  —  subdivision  of  stores,  188 

surveys,  183,  184,  185 

Transfer  Books,  169 

utility  as    regards    quantity   on 

hand,  183 
Storekeeper,    adjustment    of  accounts, 

169 

—  cartage,  208 

—  definition,  259 

—  deliveries  due,  220 

—  effects  of  survey,  187 

—  efficiency  of  control,  191,  192 

—  estimates  of  cost,  87 

—  goods  retailed,  180 

—  invoices,  80,  81 

—  mechanical  aids,  189 

—  numbering  warrants,  90 

—  purchase  of  material,  74 

—  quantities  on  hand,  19 

—  receipt  of  goods,  94 

—  rejection  of  goods,  92,  93 
— -  removal  of  goods,  190,  191 

—  requisition  for  material,  88 

—  responsibility,  187 

—  scrap  material,  94 

—  Shop  Returns  Book,  97 

—  Stores  Issued  Book,  89 
Ledger,  183 

—  —  Received  Book,  82 

—  surplus  material,  86,  94 

—  surveys,  185 


286 


INDEX. 


Storekeeper,  Transfer  Book,  97 

—  transfers,  97,  169,  iSi,  182 
Stores  Price  and  Index  Book,  192 

—  notes,  temporary,  72 

Stores  deceived  Book,  definition,  259 

register,  82,  189 

specimen,  81 

—  form,  80 
Stores,  invoices,  80 

—  purpose  of,  82,  85 

—  stock,  no 
Stores  Register,  189 

Stores  Rejected  Book,  92,  259 

specimen  of,  92 

Stores  Rejected  Note,  93 

Stores  Requisition,  definition,  259 

how  entered,  75 

specimen  of,  76 

Stores    Requisition    Book,    definition, 

259 
Credit  Notes,  92,  93 

—  —  description  of,  75 

need  of,  79 

purpose,  74 

specimen,  76 

Stores  Sent  Away  Form,  92 
Stores  Sold  Analysis  Book,  18 1 
Stores  survey,  200 

sheets,  188 

—  system,  essential  conditions  of,  iS6, 

190 
Stores  Tags,  igo 

Stores  Transfer  Book,  169,  170,  171 
Stores  viewer's  advice  form,  84 
Stores  Warrants,  definition,  259 
distinguished        from        Stores 

Requisition,  89 

numbering,  90 

prime  cost,  91,  108 

specimen,  109 

transfer  books,  181 

Strachan,    Mr.    W.,    Cost    Accounts, 

17 
Straight  Line  system,  148 


Strikes,  9,  22 

Subbing,  61 

Subdivision  of  departments,  24 

Subsidiary  Companies,  197 

Sudnian,  Frank  G.,  124 

Sundry  disbursements,  109 

Superintendence,  114 

Supersession,  9,  135 

Supervision,     economy     of     methods, 

14,  75 
Supplies    Delivery   Diary   (see    Stores 

Delivery  Diary) 
Surplus  Account,  199 
Surprise  Visits  Book,  219 
Surveys,  19,  30,  183-201 

—  agreement  with  commercial  ledger, 

85,  179,  184 

—  agreement   with   stores    and    stock 

ledgers,  85,  180,  185 

—  and  single  entry,  184 

—  and  valuation,  187,  193 

—  at  one  time,  184 

—  based  on  "handling,"  186 

—  by  degrees,  185 

—  efficiency  of,  186 

—  epitome  of,  186 

—  periodical,  185 
Swvey  Sheets,  186,  187 
Surveys,  simultaneous,  185 

—  transactions  during,  184,  185 
Suspense  account,  259 

Suspension  of  business   in  connection 

with  surveys,  185 
Swinfen  Eady,  Mr.  Justice,  145 
Symbolic  nomenclature,  105,  225-232, 

259 
Syphons,  217 
System  in  factory  costs,  158 


TABULAR     Forms    and 
Ledger,  82 
Tabs,  186,  190 


Stores 


tNDEX. 


2S7 


Tags,  186,  190 

Tailoring     factories     and      piecework, 

50 
Tare  of  wagons  and  vans,  214 
Tarpaulins,  217 
Task  earning,  5 

Taxation,  Royal  Commission  on,  239 
Taxes,  9 

Taylor,  Mr.  Miles,  12 
Taylor,  Mr.  R.  Whately  Cooke,  15 
Technicians  and  accountants,  9 
Telephone  accounting  and  depreciation, 

134 
Tenders,  invitations  for,  76 
Terminal  charges,  213 
Terminology,  4,  5 
Terms  of  payment,  77,  173 
Test  costs,  28 
Timber,  valuation  of,  194 
Time  Allocation  Book,  43,  44,  259 

—  Boards  or  sheet,  41 

—  Book,  16,  35-46,  259 

—  cards,  34,  42 

—  checks,  34,  35 

—  clocks,  34,  42 

—  contracts,  136 

—  earnings,  5 

—  how  recorded,  35,  45 

—  lost,  39 

—  office,  41,  44 

—  outside  factory,  33,  44,  45 

—  Recorders,  34,  43 

Time  Records,  32,  41,  42,  43,  259 

Time  Registers,  42 

Time  Sheet,  215,  260 

Time   Clerk,   Allocation  Book,  43,  50, 

70,  71 
Time  clerk,  allocation  of  wages,  34 
duties,   34,    43-49,   50,    63,    70, 

156 
interruptions  to  piecework,  50, 

52 

machine  hours,  157 

• —  —  out-works  time  sheet,  44 


Time  clerk,  overtime  return,  47 

—  —  piecework  returns,  50,  52 
possibility  of  fraud  by,  32 

—  —  receipts  for  wages,  63 
Time  clocks  (see  Time  Recorders) 
Timekeeper,  changing  shifts,  38 

—  definition,  259 

—  duties,  34,  35,  42,  45,  72 

—  entry  and   exit   of  employees,    34, 

35 

—  possibility  of  fraud  by,  32 

—  summary  of  time  book,  41 

—  time  records,  44 
Tins,  pay,  64 
Tolls,  9 

Ton  miles,  10,  II,  209 

Tools,  ascertainment  of  cost,  106 

—  cost  of  setting,  106 

—  definition,  260 

—  depreciation,  16,  126 

—  incidence  of  cost,  22,  126 

—  kits,  154 

—  loose,  152 
register,  154 

—  manufacture,  16,  106 

—  obsolescence,  133 
Tools,  Order,  106,  260 
Tools,  out-stations,  85 

—  surveys  of,  188 

—  symbolic  nomenclature,  226 

—  worn-out,  154 
Towage  Book,  216 
Towages,  214,  216 
Towne,  Mr.  Henry  R.,  105 
Trade  expenses,  purchase  hire,  204 

—  marks,  162 

—  unions,  piecework,  51 

—  volume  of,  and  depreciation,  136 
Trades  Boards  Act,  222 

Trading  account,  113,  179,  181,  260 
Tramway  companies  and  double  account 
system,  131 

expenditure  in  shops,  206 

Transfer  Analysis  Book,  171,  260 


288 


INDEX. 


Transfer  Book,  97,  169,  170,  171,  182, 
360 

articles  retailed,  181 

Transfer  Notes,  169,  170,  17 1,  260 
Transfers,  departmental,  171 
Transport,  Ministry  of,  Act,  211 
Transportation,  9 
Troughs,  rent  of,  61 
Truck  Acts,  61 

Report   of  Departmental   Com- 
mittee, 61 
Trust  Companies,  197 
Tyne  Boiler  Works,  rating,  236 


T  JNCLAIMED  Wages  Book,  64,  65, 

^      260 

Undertakings,  communal,  7 
Unemployment  contributions,  61 
Uniform  accounting,  193 
Units  of  cost,  10,  II 
Unpunctuality,  fines,  49 
Unskilled  labour,  136 


VALUATION  assets,  143 
—  definition,  260 

—  depreciation,  135 

—  Income  Tax  Acts,  144 

—  in  war  time,  197 

—  loose  plant  and  tools,  152 

—  stock  and  stores,  188,  193 

—  surveys,  185 

—  value,  5 
Value,  "basic,"  194 
Variables,  change  in,  12 

Vedder,    Professor    H.    C.    M.    (Cost 

Accounting),  24 
Vehicles  account,  209 

—  motor,  209 

Verner    v.    General    and    Commercial 

Trust,  50,  139 
Viewing  advice  form,  84 


Viewer  (see  Piecework),  260 
Visitors  Book,  220 


■t  1  rAGES,  5 
V  V        —  Abstract,  70,  260 

—  account,  260 

—  advance  on  account  of,  62 

—  Advice,  57,  58,  59,  260 

—  allocation  of,  32,  33,  70,  109 

—  and  accountants,  15 

—  banking  account,  62 

—  Bargain  theory,  16 

—  Board  of  Trade  Order,  62 

—  Book,    32,    33,   44,    47,   52,  59-70, 

260 

and  overtime,  47 

and  piecework  balances,  52 

and  rents,  72,  73 

clerk,  42,  47,  52 

•  commercial  ledger,  109 

—  broken  periods,  64 

—  cost  of  production,  19 

—  deductions  from,  t^t,,  221 

—  definition,  260 

—  "dummy  men,"  32,  33 

—  estimate,  87 

—  factory  general  charges,  108 

—  foremen,  107 

—  four-weekly  periods,  64 

—  frauds  in,  33 

—  gatekeepers,  107 

—  general  charges,  107 

—  Journal,  70 

—  loose  plant  and  tools,  152 

—  mode  of  payment,  63-70 

—  monthly  period,  64 

—  payment,  15,  16 

—  Pay  Note,  65,  66 

—  peculation,  59 

—  plant  and  machinery,  152-155 

—  prime  cost,  29,  109 

—  Rate  Book,  56,  58,  62,  260 

—  —  specimen  ruling,  59 


INDEX. 


289 


JVages  Receipts,  63,  64 

—  record  of  rate,  56 

—  reduction  of,  22 

—  Reiitittaiice,  66 

—  —  form,  66 

—  rent,  72 

—  registration  of,  16 

—  rolls,  64 

—  sliding  scale,  22 

— ■  specimen  ruling,  56-60 

—  Sti/nma>y,  33,  60,  62 

—  system,  28,  32-72 

—  timekeeper,  107 

—  Truck  Acts,  61 

—  unclaimed,  33,  64 
book,  65 

Wagon  and  Van  Book,  213 
Wagon  controller,  214 

—  hire  and  Income  Tax,  205 
Wagons    and    purchase    hire    system, 

203 
IVagons  Repaired  Book,  214,  260 
Wagons,  tare  of,  214 

—  use  of,  on  private  lines  and  sidings, 

222 
Walking  time,  65 
War,  9 
Warehouse,  advice,  173 

—  definition,  260 

—  excess  supplies,  192 

—  loading,  216 

—  location  of,  189 

—  orders  received,  173 

—  records  of  issues,  175 

—  repairs  of,  105 

—  repository  of  parts  for  sale,  182 

—  retail,  180 

—  return  of  loaned  goods,   i6'6,    175- 

177 

—  return  of  rejected  goods,  166,  175, 

176 

—  Stock  Issued  Book,  175 

—  stock  received,  1 1 1 

—  storekeeper  and  stock,  190 


Warehouse,  subdivisions,  189 

—  subsidiary  books,  202 

—  supply  of  parts,  190,  191 

—  transfers  to  and  from  factory,   168- 

171 

—  transfers  to  stores,  97 
Warehouseman,  adjustments  with  store, 

97,  169 

—  cartage,  208 

—  daily  return,  175 

—  definition,  260 

— ■  effect  of  surveys,  187 

—  efficiency  of  control,  191 

—  Empties  Book,  217 

—  goods  retailed,  180 

—  material,  190 

—  mechanical  aids,  189 

—  permits,  191 

—  schedule  of  stores,  192 

—  stock,  19 

—  Stock  Issued  Book,  167 

Ledger,  183 

Received  Book,  in 

—  stock  returned,  167 

—  subdivisions,  1S9 

—  surveys,  1 80- 190 
War  Ofifice,  3,  210 

—  time  values,  196 
Wastage,  prevention  of,  16 
Waste  account,  96 

—  in  cotton  mills,  96 

—  in  stores,  187 

—  of  premises,  152 
Wasters,  96 
Wasting  assets,  164 
Watchmen  and  permits,  191 

Water   companies'   accounts,    23,    133, 
205 

—  —  factory  books,  23 

—  consumption,  9,  219 

Water  Meter  Reading  Books,  219 
Wayleaves,  8 
Wealth,  production  of,  25 
Wear  and  tear,  2,  135,  204,  261 

U 


290 


INDEX. 


Weather  Chart  Book,  220 

Weekly  and  Monthly  Records,  43 

Weighbridges,  21 8,  219 

Weigh  House,  21S 

Weighing  and  Moisture,  186 

Weighing-  Machine  Book,  218 

Weights  and  Measures  Act,  219 

Wharves,  216 

\^hite washing  shops,  72 

Whitmore,  Mr.  John,  27,  61 

Wilmer   v.   McNamara  &   Co.,    Ltd. 

140 
Wilson,  Mr.  Gordon,  96 
Wine,  valuation  of  stock  of,  196 


Women,  regulations  as  to  employ- 
ment of,  14 

Working  capital,  8 

IVorh'ng-  Orders,  41,  69,  77,  87,  91, 
152,  156-161,  261 

Workpeople  (see  Employees) 

Works  accounting,  lecture  on,  129 

—  manager,    82,    86,    97,     102,     106, 

113 
Workshop  administration,  208 
Workmen's  Compensation  Act,  62 
Work  in  progress,  1 14 

—  valuation  of,  193 

Writing  off,  22,  128,  163,  200,  261 


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